content: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 10-Q
  
                [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
  
                    For the quarterly period ended June 30, 1998
                                                   -------------
  
                                         OR
  
                [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
  
                    for the transition period from _____ to _____
  
                            Commission file number 1-8323
                                                   ------
  
                                  CIGNA Corporation
                       ---------------------------------------
               (Exact name of registrant as specified in its charter)
  
               Delaware                                  06-1059331
            -------------                                ----------
       (State or other jurisdiction                  (I.R.S. Employer
       of incorporation or organization)            Identification No.)
  
                        One Liberty Place, 1650 Market Street
                        Philadelphia, Pennsylvania 19192-1550
                       ---------------------------------------
                 (Address of principal executive offices) (Zip Code)
  
                 Registrant's telephone number, including area code:
                                   (215) 761-1000
                                   --------------
  
                                   Not Applicable
                       ---------------------------------------
                (Former name, former address and former fiscal year,
                            if changed since last report)
  
           Indicate by check mark whether the registrant (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
  1934  during  the  preceding  12 months  (or for such  shorter  period  that the
  registrant was required to file such reports),  and (2) has been subject to such
  filing requirements for the past 90 days.
  
                                                 Yes  x     No __
  
    As of June 30,  1998,  212,280,085  shares of the  issuer's  Common Stock were
  outstanding.
  <PAGE>
  
                                  CIGNA CORPORATION
  
  
                                        INDEX
  
  
                                                                          Page No.
                                                                          --------
  
  PART I.           FINANCIAL INFORMATION
  
                    Item 1. Financial Statements                             
  
                            Consolidated Income Statements                   1
                            Consolidated Balance Sheets                      2
                            Consolidated Statements of Comprehensive         
                             Income and Changes in Shareholders'
                             Equity                                          3
                            Consolidated Statements of Cash Flows            4
                            Notes to Financial Statements                    5
  
                    Item 2. Management's Discussion and
                            Analysis of Financial Condition
                             and Results of Operations                      11
  
  PART II.          OTHER INFORMATION
  
                    Item 4. Submission of Matters to a Vote of
                             Security Holders                               23
                    Item 6. Exhibits and Reports on Form 8-K                24
  
  SIGNATURE                                                                 25
       
  EXHIBIT INDEX                                                             26
  
  
  As used  herein,  "CIGNA"  refers  to one or more of CIGNA  Corporation  and its
  consolidated subsidiaries.
  
  <PAGE>
  Part I.  FINANCIAL  INFORMATION
  Item 1.  Financial Statements
  
  CIGNA  CORPORATION
  CONSOLIDATED INCOME STATEMENTS
  (In millions, except per share amounts)
  <TABLE>
  <CAPTION>
  <S>                                                      <C>             <C>                        <C>            <C>       
                                                                Three Months Ended                         Six Months Ended
                                                                     June 30,                                  June 30,
                                                               1998            1997                      1998            1997
  ==============================================================================================================================
  REVENUES
  Premiums and fees                                        $    4,115      $    3,482                 $   8,016      $    6,870
  Net investment income                                           942           1,062                     1,879           2,115
  Other revenues                                                  217             163                       731             323
  Realized investment gains                                        47              12                       106              56
                                                             ---------       ---------                  --------       ---------
      Total revenues                                            5,321           4,719                    10,732           9,364
                                                             ---------       ---------                  --------       ---------
  
  BENEFITS, LOSSES AND EXPENSES
  Benefits, losses and settlement expenses                      3,464           3,065                     6,797           6,074
  Policy acquisition expenses                                     239             270                       467             534
  Other operating expenses                                      1,147             973                     2,229           1,908
                                                             ---------       ---------                  --------       ---------
      Total benefits, losses and expenses                       4,850           4,308                     9,493           8,516
                                                             ---------       ---------                  --------       ---------
  
  INCOME BEFORE INCOME TAXES                                      471             411                     1,239             848
                                                             ---------       ---------                  --------       ---------
  
  Income taxes (benefits):
      Current                                                     176             124                       608             234
      Deferred                                                    (13)              8                      (172)             47
                                                             ---------       ---------                  --------       ---------
          Total taxes                                             163             132                       436             281
                                                             ---------       ---------                  --------       ---------
  
  NET INCOME                                               $      308      $      279                 $     803      $      567
  ----------------------------------------------------==========================================================================
  
  BASIC EARNINGS PER SHARE                                 $     1.44      $     1.26                 $    3.74      $     2.57
  ----------------------------------------------------==========================================================================
  
  DILUTED EARNINGS PER SHARE                               $     1.42      $     1.25                 $    3.70      $     2.55
  ----------------------------------------------------==========================================================================
  
  DIVIDENDS DECLARED PER SHARE                             $     0.29      $     0.28                 $    0.57      $     0.55
  ----------------------------------------------------==========================================================================
  </TABLE>
  
  The Notes to Financial Statements are an integral part of these statements.
  
  
                                         1
  <PAGE>
  CIGNA  CORPORATION
  CONSOLIDATED  BALANCE  SHEETS
  (In millions, except per share amounts)
  <TABLE>
  <CAPTION>
  <S>                                                                                      <C>                           <C>   
                                                                                        As of                          As of
                                                                                       June 30,                   December 31,
                                                                                         1998                          1997
  ==============================================================================================================================
  ASSETS
  Investments:
     Fixed maturities, at fair value (amortized cost, $30,931; $34,284)             $     32,920                  $      36,358
     Equity securities, at fair value (cost, $765; $648)                                   1,089                            854
     Mortgage loans                                                                        9,503                         10,859
     Policy loans                                                                          6,579                          7,253
     Real estate                                                                             766                            769
     Other long-term investments                                                             318                            273
     Short-term investments                                                                  232                            212
                                                                                      -----------                   ------------
         Total investments                                                                51,407                         56,578
  Cash and cash equivalents                                                                1,903                          2,625
  Accrued investment income                                                                  856                            868
  Premiums, accounts and notes receivable                                                  4,528                          4,265
  Reinsurance recoverables                                                                12,400                          6,753
  Deferred policy acquisition costs                                                          951                          1,542
  Property and equipment                                                                     858                            857
  Deferred income taxes                                                                    1,924                          1,788
  Other assets                                                                             1,146                          1,033
  Goodwill and other intangibles                                                           2,490                          2,542
  Separate account assets                                                                 32,464                         29,348
  ------------------------------------------------------------------------------------------------------------------------------
  
          Total assets                                                              $    110,927                  $     108,199
  ------------------------------------------------------------------------------------==========================================
  
  LIABILITIES
  Contractholder deposit funds                                                      $     30,524                  $      30,682
  Unpaid claims and claim expenses                                                        17,841                         17,906
  Future policy benefits                                                                  12,093                         11,976
  Unearned premiums                                                                        1,839                          1,774
                                                                                      -----------                   ------------
           Total insurance and contractholder liabilities                                 62,297                         62,338
  Accounts payable, accrued expenses and other liabilities                                 6,216                          6,562
  Current income taxes                                                                       159                             60
  Short-term debt                                                                            254                            690
  Long-term debt                                                                           1,440                          1,465
  Separate account liabilities                                                            32,221                         29,152
  ------------------------------------------------------------------------------------------------------------------------------
           Total liabilities                                                             102,587                        100,267
  ------------------------------------------------------------------------------------------------------------------------------
  
  CONTINGENCIES - NOTE 9
  
  SHAREHOLDERS' EQUITY
  Common stock (par value, $.25; shares issued, 265; 264)                                     66                             66
  Additional paid-in capital                                                               2,704                          2,655
  Net unrealized appreciation - fixed maturities                           $    745                      $    752
  Net unrealized appreciation - equity securities                               212                           132
  Net translation of foreign currencies                                        (122)                         (126)
                                                                             -------                       -------
     Accumulated other comprehensive income                                                  835                            758
  Retained earnings                                                                        6,376                          5,696
  Less treasury stock, at cost                                                            (1,641)                        (1,243)
  ------------------------------------------------------------------------------------------------------------------------------
           Total shareholders' equity                                                      8,340                          7,932
  ------------------------------------------------------------------------------------------------------------------------------
  
           Total liabilities and shareholders' equity                               $    110,927                  $     108,199
  ------------------------------------------------------------------------------------==========================================
  
  SHAREHOLDERS' EQUITY PER SHARE                                                    $      39.29                  $       36.55
  ------------------------------------------------------------------------------------==========================================
  </TABLE>
  
  The Notes to Financial Statements are an integral part of these statements.
  
                                          2
  <PAGE>
  CIGNA  CORPORATION
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND CHANGES IN
      SHAREHOLDERS' EQUITY
  (In millions)
  <TABLE>
  <CAPTION>
  <S>                                                                         <C>                    <C>    <C>                 <C>
  Three Months Ended June 30,                                                             1998                        1997
  -----------------------------------------------------------------------------------------------------------------------------------
                                                                                  Compre-       Share-        Compre-         Share-
                                                                                  hensive      holders'       hensive        holders'
                                                                                   Income       Equity         Income         Equity
  ===================================================================================================================================
  Common stock                                                                              $        66                 $        66
                                                                                              ----------                  ----------
  Additional paid-in capital - April 1                                                            2,695                       2,605
    Issuance of common stock for employee benefits plans                                              9                          27
                                                                                              ----------                  ----------
  Additional paid-in capital - June 30                                                            2,704                       2,632
                                                                                              ----------                  ----------
  
  Accumulated other comprehensive income - April 1                                                  812                         307
    Net unrealized appreciation - fixed maturities                            $        22            22     $       174         174
    Net unrealized appreciation (depreciation) - equity securities                     (2)           (2)             35          35
                                                                                ----------                    ----------
        Net unrealized appreciation on securities                                      20                           209
    Net translation of foreign currencies                                               3             3             (20)        (20)
                                                                                ----------                    ----------
            Other comprehensive income                                                 23                           189
                                                                                              ----------                  ----------
  Accumulated other comprehensive income - June 30                                                  835                         496
                                                                                              ----------                  ----------
  
  Retained earnings - April 1                                                                     6,129                       5,082
    Net income                                                                        308           308             279         279
    Common dividends declared                                                                       (61)                        (62)
                                                                                              ----------                  ----------
  Retained earnings - June 30                                                                     6,376                       5,299
                                                                                              ----------                  ----------
  
  Treasury stock - April 1                                                                       (1,377)                       (943)
    Repurchase of common stock                                                                     (260)                         --
    Other treasury stock transactions, net                                                           (4)                         (2)
                                                                                             ----------                  ----------
  Treasury stock - June 30                                                                       (1,641)                       (945)
  ----------------------------------------------------------------------------------------------------------------------------------
  TOTAL COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY                         $       331   $     8,340     $       468 $     7,548
  ------------------------------------------------------------------------------====================================================
  
  Six Months Ended June 30,
  ----------------------------------------------------------------------------------------------------------------------------------
  Common stock                                                                              $        66                 $        66
                                                                                              ----------                  ----------
  
  Additional paid-in capital - January 1                                                          2,655                       2,594
    Issuance of common stock for employee benefits plans                                             49                          38
                                                                                              ----------                  ----------
  Additional paid-in capital - June 30                                                            2,704                       2,632
                                                                                             ----------                  ----------
  
  Accumulated other comprehensive income - January 1                                                758                         582
    Net unrealized depreciation - fixed maturities                            $        (7)           (7)    $      (106)       (106)
    Net unrealized appreciation - equity securities                                    80            80              48          48
                                                                                ----------                    ----------
        Net unrealized appreciation (depreciation) on securities                       73                           (58)
    Net translation of foreign currencies                                               4             4             (28)        (28)
                                                                                ----------                    ----------
            Other comprehensive income (loss)                                          77                           (86)
                                                                                              ----------                  ----------
  Accumulated other comprehensive income - June 30                                                  835                         496
                                                                                              ----------                  ----------
  Retained earnings - January 1                                                                   5,696                       4,855
    Net income                                                                        803           803             567         567
    Common dividends declared                                                                      (123)                       (123)
                                                                                              ----------                  ----------
  Retained earnings - June 30                                                                     6,376                       5,299
                                                                                              ----------                  ----------
  Treasury stock - January 1                                                                     (1,243)                       (889)
    Repurchase of common stock                                                                     (371)                        (49)
    Other treasury stock transactions, net                                                          (27)                         (7)
                                                                                             ----------                  ----------
  Treasury stock - June 30                                                                       (1,641)                       (945)
  ----------------------------------------------------------------------------------------------------------------------------------
  TOTAL COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY                         $       880   $     8,340     $       481 $     7,548
  ------------------------------------------------------------------------------====================================================
  </TABLE>
  The Notes to Financial Statements are an integral part of these statements.
  
                                          3
  <PAGE>
  CIGNA  CORPORATION
  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
  (In millions)
  <TABLE>
  <CAPTION>
  <S>                                                                                 <C>                         <C>        
                                                                                              Six Months Ended June 30,
                                                                                          1998                        1997
  ===========================================================================================================================
  CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                                                      $       803                 $       567
      Adjustments to reconcile net income to net cash
          provided by (used in) operating activities:
              Insurance liabilities                                                           324                        (256)
              Reinsurance recoverables                                                        224                         399
              Deferred policy acquisition costs                                               (70)                        (71)
              Premiums, accounts and notes receivable                                        (265)                        (36)
              Accounts payable, accrued expenses, other liabilities and
                  current income taxes                                                       (357)                       (180)
              Deferred income taxes                                                          (172)                         47
              Realized investment gains                                                      (106)                        (56)
              Depreciation and goodwill amortization                                          156                          99
              Gain on sale of businesses                                                     (367)                         --
              Other, net                                                                     (273)                       (160)
                                                                                        ----------                  ----------
                  Net cash provided by (used in) operating activities                        (103)                        353
                                                                                        ----------                  ----------
  
  CASH FLOWS FROM INVESTING ACTIVITIES
      Proceeds from investments sold:
          Fixed maturities                                                                  3,688                       3,128
          Equity securities                                                                   173                         148
          Mortgage loans                                                                      562                         322
          Other (primarily short-term investments)                                          1,169                       2,279
      Investment maturities and repayments:
          Fixed maturities                                                                  1,928                       1,974
          Mortgage loans                                                                      348                         241
      Investments purchased:
          Fixed maturities                                                                 (5,277)                     (4,905)
          Equity securities                                                                  (353)                       (193)
          Mortgage loans                                                                     (920)                       (714)
          Other (primarily short-term investments)                                         (1,739)                     (1,689)
      Net cash from acquisitions and dispositions                                           1,296                      (1,288)
      Other, net                                                                             (179)                        (75)
                                                                                        ----------                  ----------
                  Net cash provided by (used in) investing activities                         696                        (772)
                                                                                        ----------                  ----------
  
  CASH FLOWS FROM FINANCING ACTIVITIES
      Deposits and interest credited to contractholder deposit funds                        4,430                       3,656
      Withdrawals and benefit payments from contractholder deposit funds                   (4,805)                     (3,576)
      Net change in short-term debt                                                          (362)                        146
      Issuance of long-term debt                                                               --                         600
      Repayment of long-term debt                                                             (99)                        (26)
      Repurchase of common stock                                                             (366)                        (55)
      Issuance of common stock                                                                 17                           3
      Common dividends paid                                                                  (122)                       (122)
                                                                                        ----------                  ----------
                  Net cash provided by (used in) financing activities                      (1,307)                        626
                                                                                        ----------                  ----------
  Effect of foreign currency rate changes on cash and cash equivalents                         (8)                        (23)
  ----------------------------------------------------------------------------------------------------------------------------
  Net increase (decrease) in cash and cash equivalents                                       (722)                        184
  Cash and cash equivalents, beginning of period                                            2,625                       1,760
  ----------------------------------------------------------------------------------------------------------------------------
  
  Cash and cash equivalents, end of period                                            $     1,903                 $     1,944
  --------------------------------------------------------------------------------------======================================
  
  Supplemental Disclosure of Cash Information:
      Income taxes paid, net of refunds                                               $       494                 $       311
      Interest paid                                                                   $        66                 $        47
  ----------------------------------------------------------------------------------------------------------------------------
  </TABLE>
  
  The Notes to Financial Statements are an integral part of these statements.
  
                                          4
  
  <PAGE>
  CIGNA CORPORATION
  NOTES TO FINANCIAL STATEMENTS
  
  NOTE 1 - BASIS OF PRESENTATION
  
  The consolidated  financial statements include the accounts of CIGNA Corporation
  and  all  significant   subsidiaries  (CIGNA).   These  consolidated   financial
  statements have been prepared in conformity with generally  accepted  accounting
  principles.  Certain  reclassifications  have been made to conform with the 1998
  presentation.
  
  The interim  financial  statements  are  unaudited  but include all  adjustments
  (consisting  of normal  recurring  adjustments)  necessary,  in the  opinion  of
  management, for a fair statement of financial position and results of operations
  for the periods reported.
  
  The preparation of interim financial  statements  necessarily  relies heavily on
  estimates.  This and  certain  other  factors,  such as the  seasonal  nature of
  portions of the  insurance  business  as well as  competitive  and other  market
  conditions,  call for  caution  in drawing  specific  conclusions  from  interim
  results.
  
  On April 22, 1998, CIGNA's  shareholders  approved a three-for-one  common stock
  split,  an increase in the number of common shares  authorized for issuance from
  200 million to 600 million and a decrease in the par value of common  stock from
  $1 per share to $0.25 per share.  The additional  shares were distributed on May
  15, 1998, to  shareholders  of record as of May 4, 1998. The reduction in common
  stock and  corresponding  increase in additional  paid-in capital of $22 million
  reflects these actions and all share data have been  retroactively  adjusted for
  the stock split as though the split had occurred at the beginning of the periods
  presented.
  
  
  NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS
  
  In 1998, the Financial  Accounting  Standards  Board (FASB) issued  Statement of
  Financial  Accounting  Standards  (SFAS) No.  133,  "Accounting  for  Derivative
  Instruments and Hedging  Activities."  SFAS No. 133 requires that derivatives be
  reported  on the  balance  sheet  at  fair  value.  Changes  in fair  value  are
  recognized  in net income or, for  derivatives  which are  hedging  market  risk
  related to future cash flows,  in the  accumulated  other  comprehensive  income
  section of shareholders' equity. Implementation is required by the first quarter
  of 2000,  with the  cumulative  effect of adoption  reflected  in net income and
  accumulated other comprehensive income, as appropriate. CIGNA has not determined
  the effect or timing of implementation of this pronouncement.
  
  In 1997,  the FASB  issued  SFAS No.  131,  "Disclosures  about  Segments  of an
  Enterprise  and Related  Information,"  which could  change the way segments are
  structured and require additional segment  disclosure.  CIGNA has not determined
  the effect or timing of implementation of this pronouncement,  which is required
  by December 31, 1998.
  
  The American Institute of Certified Public Accountants  (AICPA) issued Statement
  of Position  (SOP) 97-3,  "Accounting  by Insurance  and Other  Enterprises  for
  Insurance-Related  Assessments"  in 1997.  SOP  97-3  provides  guidance  on the
  recognition   and  measurement  of  liabilities  for  guaranty  fund  and  other
  insurance-related  assessments.  Implementation is required by the first quarter
  of 1999, with the cumulative  effect of adopting the SOP reflected in net income
  in the year of  adoption.  CIGNA  has not  determined  the  effect  or timing of
  implementation of this pronouncement.
  
  In 1998,  the AICPA  issued  SOP  98-1,  "Accounting  for the Costs of  Computer
  Software  Developed or Obtained for Internal  Use." SOP 98-1 specifies the types
  of costs that must be capitalized  and amortized  over the  software's  expected
  useful  life and the types of costs  which  must be  immediately  recognized  as
  expense. Implementation is required by the first quarter of 1999. Although CIGNA
  has not yet determined the timing of  implementation,  this pronouncement is not
  expected to have a
  
                                          5
  <PAGE>
  material effect on results of operations, liquidity or financial condition.
  
  
  NOTE 3 - ACQUISITIONS AND DISPOSITIONS
  
  As of January 1, 1998,  CIGNA sold its  individual  life  insurance  and annuity
  businesses for cash proceeds of $1.4 billion.  The sale resulted in an after-tax
  gain of $773  million of which $202 million was  recognized  upon closing of the
  sale.  Since the principal  agreement to sell these businesses is in the form of
  an indemnity reinsurance arrangement, the remaining $571 million of the gain was
  deferred and is being  recognized at the rate that earnings from the  businesses
  sold would have been  expected  to emerge,  primarily  over  fifteen  years on a
  declining basis. Also, as part of the transaction,  CIGNA recorded a reinsurance
  recoverable  from  the  purchaser  of $5.8  billion  for  insurance  liabilities
  retained and transferred invested assets of $5.4 billion along with other assets
  and liabilities associated with the businesses. The sales agreement provides for
  post-closing adjustments, however, any future adjustments are not expected to be
  material to results of operations, liquidity or financial condition.
  
  CIGNA acquired the outstanding common stock of Healthsource, Inc. (Healthsource)
  on June 25, 1997. The cost of the acquisition  was $1.7 billion,  reflecting the
  purchase of  Healthsource  common stock for $1.4 billion and the  retirement  of
  Healthsource  debt of $250  million.  The  acquisition  was  accounted  for as a
  purchase,  and was  financed  through  the  issuance of  long-term  debt of $600
  million and a combination of internally generated funds and short-term debt. The
  results  of  operations  of  Healthsource   are  included  in  the  accompanying
  consolidated  financial  statements from the date of  acquisition.  Healthsource
  revenues  that are not  included  in  CIGNA's  results of  operations  were $489
  million and $971 million for the second  quarter and six months of 1997. The pro
  forma effect on CIGNA's net income was not material.
  
  Goodwill  and  other   intangible   assets   associated  with  the  Healthsource
  acquisition  were $1.5  billion,  including  $24 million  recorded in the fourth
  quarter of 1997 for severance of Healthsource  employees,  vacated  Healthsource
  lease space and  adjustments  to  Healthsource  net assets to conform to CIGNA's
  accounting policies. As of June 30, 1998,  approximately $6 million of severance
  was paid to approximately  475 employees.  Goodwill and other intangible  assets
  are being amortized on a straight-line  basis over periods ranging from eight to
  40 years.
  
  CIGNA had other acquisitions and dispositions  during the six months of 1998 and
  1997, the effects of which were not material to the financial statements.
  
  
  NOTE 4 - INVESTMENTS
  
  Realized Investment Gains and Losses
  
  Realized gains and losses on investments,  excluding policyholder share, were as
  follows:
  
  ---------------------------------------------------------------------
                                   Three Months           Six Months
                                      Ended                  Ended
                                     June 30,              June 30,
  (In millions)                 1998         1997       1998       1997
  ---------------------------------------------------------------------
  Realized investment
   gains (losses):
       Fixed maturities          $14           $3        $46        $29
       Equity securities          16            9         20         14
       Mortgage loans             (7)          (1)         5        (14)
       Real estate                 6           (1)         7         17
       Other                      18            2         28         10
                           --------------------------------------------
                                  47           12        106         56
  Less income taxes               15            3         36         19
  ---------------------------------------------------------------------
  Net realized investment
  gains                          $32           $9        $70        $37
  -------------------------============================================
  
  Fixed Maturities and Equity Securities
  
  Sales of  available-for-sale  fixed maturities and equity securities,  including
  policyholder share, were as follows:
  
  ---------------------------------------------------------------------
                                 Three Months           Six Months
                                    Ended                  Ended
                                   June 30,              June 30,
  (In millions)               1998        1997        1998       1997
  ---------------------------------------------------------------------
  
  Proceeds from sales       $2,175      $1,689      $3,861     $3,276
  Gross gains on sales          90          67         141         86
  Gross losses on sales        (35)        (49)        (59)       (60)
  ---------------------------------------------------------------------
  
                                          6
  <PAGE>
  The components of unrealized  appreciation  (depreciation) on securities for the
  three and six months ended June 30 were as follows:
  ------------------------------------------------------------------
  (In millions)                                     1998        1997
  ------------------------------------------------------------------
  Three months ended June 30,
  
  Unrealized appreciation on securities held,
  net of taxes of $16 and $117, respectively.        $40        $217
  Less gains realized in net income, net of
  taxes of $10 and $4, respectively.                  20           8
                                               ---------------------
  Net unrealized appreciation                        $20        $209
  ---------------------------------------------=====================
  Six months ended June 30, 
  
  Unrealized  appreciation  (depreciation) on
  securities held, net of taxes (benefits) of
  $109 and $(14), respectively.                     $219        $(30)
  Less gains realized in net income, net of
  taxes of $78 and $15, respectively.                146          28
                                               ---------------------
  Net unrealized appreciation (depreciation)         $73        $(58)
  ---------------------------------------------=====================
  
  NOTE 5 - INCOME TAXES
  
  CIGNA's federal income tax returns are routinely audited by the Internal Revenue
  Service  (IRS),  and  provisions  are  made  in  the  financial   statements  in
  anticipation  of the results of these  audits.  The IRS completed its audits for
  the years 1982 through 1993, and challenged  CIGNA on one issue related to years
  prior to 1989.  During  the third  quarter  of 1997,  the U.S.  Tax Court  ruled
  against  CIGNA on this issue.  The decision did not have an effect on results of
  operations,  as liabilities had been previously established.  In connection with
  this matter,  CIGNA made payments of approximately  $250 million during 1997 and
  $115 million in the first quarter of 1998. CIGNA has appealed the U.S. Tax Court
  decision to the U.S. Court of Appeals.
  
  In management's opinion,  adequate tax liabilities have been established for all
  years.
  
  NOTE 6 - EARNINGS PER SHARE
  
  -------------------------------------------------------------------
                                                  Effect
  (Dollars in millions,                               of
  except per share amounts)           Basic     Dilution      Diluted
  -------------------------------------------------------------------
  
  
  Three Months Ended June 30,
  -------------------------------------------------------------------
  1998
  -------------------------------------------------------------------
  Net income                           $308           --         $308
  --------------------------------===================================
  Shares (in thousands):
  
  Weighted average                  213,831           --      213,831
  Options and restricted
  stock grants                                     2,715        2,715
  -------------------------------------------------------------------
  Total shares                      213,831        2,715      216,546
  --------------------------------===================================
  Earnings per share                  $1.44      $(0.02)        $1.42
  --------------------------------===================================
  1997
  -------------------------------------------------------------------
  Net income                           $279           --         $279
  --------------------------------===================================
  Shares (in thousands):
  
  Weighted average                  220,930           --      220,930
  Options and restricted
  stock grants                                     1,843        1,843
  -------------------------------------------------------------------
  Total shares                      220,930        1,843      222,773
  --------------------------------===================================
  Earnings per share                  $1.26      $(0.01)        $1.25
  --------------------------------===================================
  
  Six Months Ended June 30,
  -------------------------------------------------------------------
  1998
  -------------------------------------------------------------------
  Net income                           $803           --         $803
  --------------------------------===================================
  Shares (in thousands):
  
  Weighted average                  214,730           --      214,730
  Options and restricted
  stock grants                                     2,415        2,415
  -------------------------------------------------------------------
  Total shares                      214,730        2,415      217,145
  --------------------------------===================================
  Earnings per share                  $3.74      $(0.04)        $3.70
  --------------------------------===================================
  1997
  -------------------------------------------------------------------
  Net income                           $567           --         $567
  --------------------------------===================================
  Shares (in thousands):
  
  Weighted average                  220,690           --      220,690
  Options and restricted
  stock grants                                     1,838        1,838
  -------------------------------------------------------------------
  Total shares                      220,690        1,838      222,528
  --------------------------------===================================
  Earnings per share                  $2.57      $(0.02)        $2.55
  --------------------------------===================================
  
  Common shares held as Treasury  shares were 52,561,178 and 41,172,189 as of June
  30, 1998 and 1997, respectively.
  
                                          7
  <PAGE>
  NOTE 7 - REINSURANCE
  
  In the normal  course of business,  CIGNA's  insurance  subsidiaries  enter into
  agreements,  primarily relating to short-duration  contracts, to assume and cede
  reinsurance  with other insurance  companies.  Reinsurance is ceded primarily to
  limit losses from large  exposures and to permit recovery of a portion of direct
  losses,  although ceded reinsurance does not relieve the originating  insurer of
  liability.  CIGNA  evaluates  the  financial  condition  of its  reinsurers  and
  monitors  concentrations of credit risk arising from similar geographic regions,
  activities or economic characteristics of its reinsurers.
  
  Failure of reinsurers to indemnify CIGNA, as a result of reinsurer  insolvencies
  and disputes, could result in losses.  Allowances for uncollectible amounts were
  $707  million  and $720  million  as of June 30,  1998 and  December  31,  1997,
  respectively.
  
  Future charges for  unrecoverable  reinsurance may materially  affect results of
  operations in future periods,  however,  such amounts are not expected to have a
  material adverse effect on CIGNA's liquidity or financial condition.
  
  For the second  quarter  and six months of 1998,  premiums  and fees were net of
  ceded  premiums of $652 million and $1.1 billion,  respectively.  For the second
  quarter and six months of 1997,  premiums and fees were net of ceded premiums of
  $589 million and $1.0 billion,  respectively.  In addition, benefits, losses and
  settlement  expenses  for the second  quarter and six months of 1998 were net of
  reinsurance recoveries of $477 million and $862 million, respectively. Benefits,
  losses and  settlement  expenses  for the second  quarter and six months of 1997
  were  net  of   reinsurance   recoveries  of  $429  million  and  $687  million,
  respectively.
  
  
  NOTE 8 - COST REDUCTION INITIATIVES
  
  In the  fourth  quarter  of  1997,  CIGNA  adopted  a  cost  reduction  plan  to
  restructure  its health care  operations,  which resulted in a pre-tax charge of
  $32 million ($22 million  after-tax)  in the Employee  Life and Health  Benefits
  segment.  The charge  consisted  primarily of costs related to  severance,  real
  estate and other costs for office  closings.  The cash outlays  associated  with
  these  initiatives will continue through 1999 with most occurring in 1998. CIGNA
  has funded and will continue to fund the cash outlays through liquid assets, and
  such  funding  has not and  will  not  have a  material  adverse  effect  on its
  liquidity.  As of June 30, 1998,  approximately $3 million of severance was paid
  to approximately 535 employees.
  
  
  NOTE 9 - CONTINGENCIES AND OTHER MATTERS
  
  Financial Guarantees
  
  CIGNA,  through its subsidiaries,  is contingently  liable for various financial
  guarantees provided in the ordinary course of business. These include guarantees
  for the repayment of industrial  revenue bonds as well as other debt instruments
  and  guarantees  of a minimum  level of benefits  for certain  separate  account
  contracts.  Although the ultimate outcome of any loss contingencies arising from
  CIGNA's  financial  guarantees  may  adversely  affect  results of operations in
  future  periods,  they are not  expected  to have a material  adverse  effect on
  CIGNA's liquidity or financial condition.
  
                                          8
  <PAGE>
  Regulatory and Industry Developments
  
  CIGNA's  businesses  are  subject  to  a  changing  social,   economic,   legal,
  legislative  and  regulatory  environment  that could affect  them.  Some of the
  changes include initiatives to: 
  o   increase health care regulation; 
  o   revise the system of funding cleanup of
      environmental damages;
  o   reinterpret insurance contracts long after the
      policies were written to provide coverage
      unanticipated by CIGNA;
  o   restrict insurance pricing and the application of
      underwriting standards; and
  o   revise federal tax laws.
  
  Some of the more significant issues are discussed below.
  
  Efforts at the federal and state level to increase regulation of the health care
  industry could have an adverse effect on CIGNA's health care  operations if they
  reduce marketplace  competition and innovation or result in increased medical or
  administrative  costs.  Matters under  consideration  that could have an adverse
  effect  include  mandated  benefits  or services  that  increase  costs  without
  improving the quality of care, loss of the Employee  Retirement  Income Security
  Act of 1974  (ERISA)  preemption  of state  law and  restrictions  on the use of
  prescription drug formularies. Due to the uncertainty associated with the timing
  and content of any proposals  ultimately adopted,  the effect on CIGNA's results
  of operations,  liquidity or financial condition cannot be reasonably  estimated
  at this time.
  
  Proposed  legislation  for  Superfund  reform  remains  under  consideration  by
  Congress. Any changes in Superfund relating to 1) assigning  responsibility,  2)
  funding  cleanup costs or 3)  establishing  cleanup  standards  could affect the
  liabilities of policyholders and insurers. Due to uncertainties  associated with
  the  timing  and  content of any  future  Superfund  legislation,  the effect on
  CIGNA's  results of  operations,  liquidity  or  financial  condition  cannot be
  reasonably estimated at this time.
  
  In 1996,  Congress passed  legislation that phases out over a three-year  period
  the tax deductibility of policy loan interest for most leveraged corporate-owned
  life  insurance  products.  CIGNA does not  expect  this  legislation  to have a
  material  effect  on  its  consolidated  results  of  operations,  liquidity  or
  financial condition.
  
  The  National  Association  of  Insurance   Commissioners  (NAIC)  is  currently
  addressing  risk-based capital  guidelines for health maintenance  organizations
  (HMOs).  CIGNA does not expect such guidelines to have a material adverse effect
  on its future results of operations, liquidity or financial condition.
  
  In 1998, the NAIC adopted standardized  statutory accounting  principles.  Since
  these  principles  have not yet been  adopted by the  insurance  departments  of
  various jurisdictions in which CIGNA's insurance subsidiaries are domiciled, the
  timing or effects of implementation have not yet been determined.
  
  The eventual  effect on CIGNA of the changing  environment  in which it operates
  remains uncertain.
  
  Property and Casualty Unpaid Claims and Claim Expense Reserves and Reinsurance
  Recoverables
  
  CIGNA's  property and casualty loss reserves are an estimate of future  payments
  for reported and unreported  claims for losses and related expenses with respect
  to insured events that have occurred.  The basic assumption  underlying the many
  traditional  actuarial and other methods used in the  estimation of property and
  casualty  loss  reserves is that past  experience  is an  appropriate  basis for
  predicting future events.  However,  current trends and other factors that would
  modify past experience are also  considered.  The process of  establishing  loss
  reserves is subject to uncertainties that are normal,  recurring and inherent in
  the property and casualty business.
  
                                          9
  <PAGE>
  Reserving  for  property  and  casualty  claims  continues  to be a complex  and
  uncertain  process,  requiring  the use of  informed  estimates  and  judgments.
  CIGNA's  estimates and judgments  may be revised as  additional  experience  and
  other data become available and are reviewed,  as new or improved  methodologies
  are  developed or as current law  changes.  Any such  revisions  could result in
  future changes in estimates of losses or reinsurance recoverables,  and would be
  reflected in CIGNA's results of operations for the period in which the estimates
  are  changed.  While the effect of any such  changes in  estimates  of losses or
  reinsurance  recoverables  could be  material to future  results of  operations,
  CIGNA does not expect such changes to have a material effect on its liquidity or
  financial condition.
  
  In management's judgment, information currently available has been appropriately
  considered in estimating CIGNA's loss reserves and reinsurance recoverables.
  
  Litigation
  
  CIGNA is continuously  involved in numerous lawsuits arising, for the most part,
  in the ordinary  course of  business,  either as a liability  insurer  defending
  third-party  claims  brought  against its  insureds  or as an insurer  defending
  coverage claims brought against it by its  policyholders or other insurers.  One
  such area of litigation involves policy coverage and judicial  interpretation of
  legal liability for asbestos-related and environmental pollution (A&E) claims.
  
  While the outcome of all litigation involving CIGNA, including insurance-related
  litigation,  cannot be  determined,  litigation  (including  that related to A&E
  claims) is not expected to result in losses that differ from  recorded  reserves
  by  amounts  that would be  material  to results  of  operations,  liquidity  or
  financial  condition.   Also,   reinsurance  recoveries  related  to  claims  in
  litigation, net of the allowance for uncollectible reinsurance, are not expected
  to result in recoveries  that differ from recorded  recoverables by amounts that
  would be material to results of operations, liquidity or financial condition.
  
  Property and Casualty Restructuring
  
  Effective  December  31, 1995,  CIGNA  restructured  its  domestic  property and
  casualty businesses into two separate operations,  ongoing and run-off.  Certain
  competitors and  policyholders  of CIGNA are challenging  the  restructuring  in
  court.  Although  CIGNA expects the matter to be in litigation for some time, it
  expects to ultimately prevail.
  
                                         10
  <PAGE>
  
  Item 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations
  
  INTRODUCTION
  
  The following  discussion addresses the financial condition of CIGNA Corporation
  (CIGNA) as of June 30, 1998, compared with December 31, 1997, and its results of
  operations for the quarter and six months ended June 30, 1998, compared with the
  same periods  last year.  This  discussion  should be read in  conjunction  with
  Management's  Discussion and Analysis  included in CIGNA's 1997 Annual Report to
  Shareholders  (pages 10 through  23) and in CIGNA's  report on Form 10-Q for the
  first  quarter  of  1998,  to  which  the  reader  is  directed  for  additional
  information.  Due to the  seasonality  of certain  aspects of CIGNA's  business,
  caution should be used in estimating  results for the full year based on interim
  results of operations.
  
  Acquisitions and Dispositions
  
  As of January 1, 1998,  CIGNA sold its  individual  life  insurance  and annuity
  businesses for cash proceeds of $1.4 billion.  The sale resulted in an after-tax
  gain of $773 million,  of which $202 million was recognized  upon closing of the
  sale.  Since the principal  agreement to sell these businesses is in the form of
  an indemnity reinsurance arrangement, the remaining $571 million of the gain was
  deferred and is being  recognized at the rate that earnings from the  businesses
  sold would have been  expected  to emerge,  primarily  over  fifteen  years on a
  declining basis.  CIGNA recognized  approximately $16 million and $33 million of
  the deferred  gain in the second  quarter and six months of 1998,  respectively.
  The sales agreement provides for post-closing  adjustments,  however, any future
  adjustments are not expected to be material to results of operations,  liquidity
  or financial condition.
  
  CIGNA's priorities for the use of capital, including proceeds from the sale, are
  internal  growth,  acquisitions  and share  repurchases.  Absent higher internal
  growth  or  attractive  acquisition  opportunities,  proceeds  from the sale are
  expected to be used for share repurchases, depending on market conditions.
  
  CIGNA acquired the outstanding common stock of Healthsource, Inc. (Healthsource)
  on June 25, 1997. The cost of the acquisition  was $1.7 billion,  reflecting the
  purchase of  Healthsource  common stock for $1.4 billion and the  retirement  of
  Healthsource  debt of $250  million.  The  acquisition  was  accounted  for as a
  purchase,  and was  financed  through  the  issuance of  long-term  debt of $600
  million and a combination of internally generated funds and short-term debt.
  
  Goodwill  and  other   intangible   assets   associated  with  the  Healthsource
  acquisition  were $1.5  billion,  including  $24 million  recorded in the fourth
  quarter of 1997 for severance of Healthsource  employees,  vacated  Healthsource
  lease space and  adjustments  to  Healthsource  net assets to conform to CIGNA's
  accounting  policies.  Annual  expense  savings  of $35  million  after-tax  are
  expected from the severance actions and vacated lease space, with  approximately
  two-thirds  emerging  in 1998 and the full  amount in 1999.  Goodwill  and other
  intangible  assets are being  amortized  on a  straight-line  basis over periods
  ranging from eight to 40 years.
  
  In addition, in the fourth quarter of 1997, CIGNA recorded a pre-tax integration
  charge of $87 million ($58 million  after-tax) in connection  with its review of
  Healthsource  operations.  The charge  primarily  resulted  from an  analysis of
  Healthsource  HMO  medical   reserves,   receivable   balances  and  contractual
  obligations.
  
  CIGNA continues to conduct  strategic and financial reviews of its businesses in
  order to deploy its capital most effectively.  In connection with these efforts,
  CIGNA has invested in various growth  initiatives  including  approximately $210
  million for recent  international  life and health expansion,  mainly in Brazil.
  Certain risks are inherent in expanding  operations in foreign countries.  These
  investments  are  routinely   monitored  for  potential   impairment.   However,
  management currently believes that such investments are recoverable.
  
  In July 1998, CIGNA entered into an agreement,  subject to certain conditions to
  closing, to make additional investments of approximately $200 million in certain
  Brazilian  health  care  companies,  resulting  in  total  investments  in these
  companies  of  approximately  $325  million.  CIGNA  expects to make  additional
  investments in these companies.
  
                                         11
  <PAGE>
  Combined revenues of these companies during 1997 were approximately $1 billion.
  
  See  Note  3  to  the  Financial   Statements  for  additional   information  on
  acquisitions and dispositions.
  
  Cost Reduction Initiatives
  
  In the  fourth  quarter  of  1997,  CIGNA  adopted  a  cost  reduction  plan  to
  restructure  its health care  operations,  which resulted in a pre-tax charge of
  $32 million ($22 million  after-tax)  in the Employee  Life and Health  Benefits
  segment.  The charge  consisted  primarily of costs related to  severance,  real
  estate and other costs for office  closings.  The cash outlays  associated  with
  these  initiatives will continue through 1999 with most occurring in 1998. CIGNA
  has funded and will continue to fund the cash outlays through liquid assets, and
  such  funding  has not and  will  not  have a  material  adverse  effect  on its
  liquidity.  These initiatives are expected to result in annual after-tax expense
  savings of $50 million with approximately  two-thirds of the savings emerging in
  1998 and the full amount in 1999.  As of June 30,  1998,  there were no material
  changes to the costs  associated with or the anticipated  annual savings related
  to these initiatives. As of June 30, 1998, approximately $3 million of severance
  was paid to approximately 535 employees.
  
  Other Matters
  
  CIGNA is highly  dependent  on  automated  systems and systems  applications  in
  conducting  its ongoing  operations.  Such systems are utilized for, among other
  things,  processing claims,  billing and collecting  premiums from customers and
  managing  investment  activities.  If these  systems were unable to process data
  accurately  because of failing to be Year 2000 ready,  these activities would be
  interrupted  and could have a  material  adverse  effect on  CIGNA's  results of
  operations.
  
  By the beginning of 1999, CIGNA expects to substantially  complete modifications
  or replacement  of its systems to ensure Year 2000  readiness and,  during 1999,
  expects to complete  testing of its systems and verify that its systems properly
  interface   with  external   parties,   including   customers  and   third-party
  administrators.  CIGNA is utilizing both internal and external resources to meet
  this  timetable.  The  after-tax  costs  of these  efforts  are  expected  to be
  approximately $100 million in 1998 and $50 million in 1999. Approximately 60% of
  total Year 2000 costs are attributable to existing systems  resources which have
  been  redirected  to the Year 2000  efforts.  The  remaining  amounts  represent
  incremental  costs for Year 2000 efforts.  Due to the complexities of estimating
  remediation  costs,  estimates  are  subject  to  change  as Year  2000  efforts
  progress. Year 2000 costs for the second quarter and six months of 1998 were $28
  million and $42 million after-tax, respectively.
  
  As noted above, CIGNA has relationships with various third-party entities in its
  ordinary  course of business.  CIGNA is assessing and attempting to mitigate its
  risks with respect to the failure of these  entities to be Year 2000 ready.  The
  effect,  if any,  on CIGNA's  results of  operations  from the  failure of these
  entities  to be Year  2000  ready  is not  reasonably  estimable.  Property  and
  casualty indemnity losses for Year 2000 claims and litigation costs to defend or
  deny such claims are not reasonably estimable at this time.
  
  Certain European  countries plan to begin  implementing a common currency (euro)
  in January 1999. CIGNA expects that it will have procedures and systems in place
  as of January 1999 to support the  implementation of the euro and that the costs
  of  these  efforts  as well  as the  overall  effect  on  CIGNA's  international
  operations will not be material.
  
  CIGNA's  businesses  are  subject  to  a  changing  social,   economic,   legal,
  legislative  and  regulatory  environment  that could affect  them.  Some of the
  changes include initiatives to: 
  o   increase health care regulation; 
  o   revise the system of funding cleanup of
      environmental damages;
  o   reinterpret insurance contracts long after the
      policies were written to provide coverage
      unanticipated by CIGNA;
  o   restrict insurance pricing and the application of
      underwriting standards; and
  o   revise federal tax laws.
  
  The eventual  effect on CIGNA of the changing  environment  in which it operates
  remains  uncertain.  For  additional  information,  see Note 9 to the  Financial
  Statements.
  
                                         12
  <PAGE>
  Recent Accounting Pronouncements
  
  In 1998, the Financial  Accounting  Standards  Board (FASB) issued  Statement of
  Financial  Accounting  Standards  (SFAS) No.  133,  "Accounting  for  Derivative
  Instruments and Hedging  Activities."  SFAS No. 133 requires that derivatives be
  reported  on the  balance  sheet  at  fair  value.  Changes  in fair  value  are
  recognized  in net income or, for  derivatives  which are  hedging  market  risk
  related to future cash flows,  in the  accumulated  other  comprehensive  income
  section of shareholders' equity. Implementation is required by the first quarter
  of 2000,  with the  cumulative  effect of adoption  reflected  in net income and
  accumulated other comprehensive income, as appropriate. CIGNA has not determined
  the effect or timing of implementation of this pronouncement.
  
  The American Institute of Certified Public Accountants  (AICPA) issued Statement
  of Position  (SOP) 97-3,  "Accounting  by Insurance  and Other  Enterprises  for
  Insurance-Related  Assessments"  in 1997.  SOP  97-3  provides  guidance  on the
  recognition   and  measurement  of  liabilities  for  guaranty  fund  and  other
  insurance-related  assessments.  Implementation is required by the first quarter
  of 1999, with the cumulative  effect of adopting the SOP reflected in net income
  in the year of  adoption.  CIGNA  has not  determined  the  effect  or timing of
  implementation of this pronouncement.
  
  In 1998,  the AICPA  issued  SOP  98-1,  "Accounting  for the Costs of  Computer
  Software  Developed or Obtained for Internal  Use." SOP 98-1 specifies the types
  of costs that must be capitalized  and amortized  over the  software's  expected
  useful  life and the types of costs  which  must be  immediately  recognized  as
  expense. Implementation is required by the first quarter of 1999. Although CIGNA
  has not yet determined the timing of  implementation,  this pronouncement is not
  expected  to have a  material  effect on  results of  operations,  liquidity  or
  financial condition.
  
  CONSOLIDATED RESULTS OF OPERATIONS
  =================================================================
  FINANCIAL SUMMARY           Three Months Ended   Six Months Ended
                                   June 30,            June 30,
  (In millions)                 1998       1997      1998      1997
  -----------------------------------------------------------------
  Premiums and fees           $4,115     $3,482    $8,016    $6,870
  Net investment income          942      1,062     1,879     2,115
  Other revenues                 217        163       731       323
  Realized investment gains       47         12       106        56
                           ----------------------------------------
  Total revenues               5,321      4,719    10,732     9,364
  Benefits and expenses        4,850      4,308     9,493     8,516
                           ----------------------------------------
  Income before taxes            471        411     1,239       848
  Income taxes                   163        132       436       281
                           ----------------------------------------
  Net income                    $308       $279      $803      $567
  -------------------------========================================
  Realized investment gains,
  net of taxes                   $32         $9       $70       $37
  -------------------------========================================
  
  CIGNA's consolidated net income increased 10% for the second quarter and 42% for
  the six months of 1998 from the same periods last year. These increases  reflect
  higher  operating  income* in the Employee Life and Health Benefits and Employee
  Retirement and Savings Benefits segments,  improved realized  investment results
  and, for the six months of 1998, the $202 million after-tax gain recognized upon
  closing of the sale of CIGNA's individual life insurance and annuity businesses.
  
  After-tax  realized  investment  results  increased  significantly in the second
  quarter and six months of 1998 from the same periods last year.  These increases
  primarily reflect gains on sales of fixed maturities,  real estate  partnerships
  and, for the six months,  mortgage loans. For additional  information see Note 4
  to the Financial Statements.
  
  Full year  operating  income  for 1998 is  expected  to be  comparable  to 1997,
  excluding  the $202 million gain on sale of businesses  discussed  above and the
  1997  Healthsource  integration  and health  care cost  reduction  charge of $80
  million.  Results for 1998 could be adversely  affected by the factors  noted in
  the cautionary statements on page 22.
  
  --------
  *Operating  income  (loss) is defined as net income (loss)  excluding  after-tax
  realized investment results.
  
                                         13
  <PAGE>
  EMPLOYEE LIFE AND HEALTH BENEFITS
  =================================================================
  FINANCIAL SUMMARY          Three Months Ended    Six Months Ended
                                   June 30,             June 30,
  (In millions)                 1998       1997      1998      1997
  -----------------------------------------------------------------
  Premiums and fees           $2,827     $2,117    $5,557    $4,220
  Net investment income          141        138       284       273
  Other revenues                 137        117       266       224
  Realized investment gains       29          1        56         7
                           ----------------------------------------
  Total revenues               3,134      2,373     6,163     4,724
  Benefits and expenses        2,881      2,186     5,675     4,352
                           ----------------------------------------
  Income before taxes            253        187       488       372
  Income taxes                    93         59       179       123
                           ----------------------------------------
  Net income                    $160       $128      $309      $249
  -------------------------========================================
  Realized investment gains,
  net of taxes                   $18         $2       $36        $6
  -------------------------========================================
  
  Net income for the Employee Life and Health Benefits  segment  increased 25% and
  24% for the  second  quarter  and six  months  of 1998,  compared  with the same
  periods  last year.  Operating  income for the second  quarter and six months of
  1998  increased 13% and 12%,  respectively,  compared with the same periods last
  year. Operating income for the Indemnity and HMO operations was as follows:
  
  ==================================================================
                              Three Months Ended    Six Months Ended
                                   June 30,             June 30,
  (In millions)                 1998       1997      1998      1997
  ------------------------------------------------------------------
  Indemnity operations           $72        $68      $141      $126
  HMO operations                  70         58       132       117
  ------------------------------------------------------------------
  Total                         $142       $126      $273      $243
  ==================================================================
  
  Indemnity  operating  income increased 6% and 12% for the second quarter and six
  months of 1998,  respectively,  compared with the same periods last year.  These
  increases primarily reflect improved claim experience.
  
  HMO  results  for  the  second  quarter  and six  months  of  1998  include  net
  unfavorable  after-tax  adjustments  of $6 million  primarily for  uncollectible
  receivables  for a health  care  service  business.  HMO  results for the second
  quarter and six months of 1997 include net favorable after-tax adjustments of $9
  million and $11 million,  respectively.  Excluding the adjustments, HMO earnings
  were $76 million and $138 million for the second quarter and six months of 1998,
  respectively,  compared  with $49 million and $106  million for the same periods
  last year. These  improvements  reflect medical membership growth primarily from
  the Healthsource acquisition and rate increases,  improved results in dental and
  mental health operations and lower operating  expenses per member due to expense
  savings  initiatives.  These improvements were partially offset by increased HMO
  medical costs reflecting  higher pharmacy and outpatient costs, and Healthsource
  goodwill and other  intangibles  amortization  of $9 million and $18 million for
  the second quarter and six months of 1998, respectively.
  
  Premiums and fees increased 34% and 32% for the second quarter and six months of
  1998,  respectively,  compared to the same  periods last year.  These  increases
  primarily reflect  Healthsource  premiums and fees of approximately $525 million
  and $1.0 billion,  respectively,  rate increases and non-Healthsource membership
  growth.  Growth in  premiums  is  expected  to  continue  to be  constrained  by
  competitive pressures in both the medical indemnity and HMO markets.
  
  Net investment  income increased 2% and 4% for the second quarter and six months
  of 1998, respectively, compared to the same periods in 1997 primarily due to the
  addition of assets related to Healthsource, partially offset by lower yields.
  
  As of June 30,  1998,  total  HMO  membership  was  approximately  6.4  million,
  representing  an increase of 41% since June 30, 1997 and 9% since  December  31,
  1997.  Approximately  65% of the increase  from June 30, 1997 is a result of the
  Healthsource  acquisition while the remaining 35% reflects  membership growth in
  CIGNA's HMO alternative  funding  programs and  traditional HMO business.  Under
  alternative  funding  programs,  the  customer  assumes  all or a portion of the
  responsibility for funding claims. CIGNA generally earns a lower margin on these
  programs than under traditional HMO plans.
  
  Management  believes  that  adding  premium  equivalents  to  premiums  and fees
  (adjusted  premiums  and fees)  produces a more  meaningful  measure of business
  volume.  Premium  equivalents for the second quarter and six months of 1998 were
  approximately  $3.2  billion  and  $6.4  billion,  respectively.  These  amounts
  represent  an increase of 34% compared  with the same  periods  last year.  This
  increase  primarily  reflects  the  Healthsource  acquisition,  and to a  lesser
  extent, higher medical
  
                                         14
  <PAGE>
  costs.  Premium  equivalents  are  expected  to continue  to be  constrained  by
  competitive  pressures in both the medical  indemnity  and HMO markets.  Premium
  equivalents  were 54% and 53% of total  adjusted  premiums  and fees for the six
  months of 1998 and 1997, respectively.  Administrative Services Only (ASO) plans
  accounted for 49% of total adjusted premiums and fees for the six months of 1998
  and 1997.
  
  EMPLOYEE RETIREMENT AND SAVINGS BENEFITS
  =================================================================
  FINANCIAL SUMMARY         Three Months Ended    Six Months Ended
                                 June 30,             June 30,
  (In millions)                 1998       1997     1998       1997
  -----------------------------------------------------------------
  Premiums and fees              $59        $52     $113        $98
  Net investment income          388        397      775        799
  Realized investment gains       12          2       16         14
                           ----------------------------------------
  Total revenues                 459        451      904        911
  Benefits and expenses          364        372      723        740
                           ----------------------------------------
  Income before taxes             95         79      181        171
  Income taxes                    31         25       58         55
                           ----------------------------------------
  Net income                     $64        $54     $123       $116
  -------------------------========================================
  Realized investment gains,
  net of taxes                    $8         $1      $11         $9
  -------------------------========================================
  
  Net income for the Employee  Retirement and Savings Benefits  segment  increased
  19% and 6% for the second quarter and six months of 1998, compared with the same
  periods of 1997.  Operating income for the second quarter and six months of 1998
  was $56 million and $112 million, compared with $53 million and $107 million for
  the same periods last year.  These  increases  reflect  higher  earnings from an
  increased  asset base,  partially  offset by  customers'  shift to lower  margin
  products (separate account equity funds).
  
  Premiums and fees increased 13% and 15% for the second quarter and six months of
  1998, respectively,  compared with the same periods last year, reflecting higher
  annuity sales and higher fees from separate accounts.
  
  Net investment  income decreased 2% and 3% for the second quarter and six months
  of 1998, respectively. These decreases primarily reflect lower investment yields
  and customers' continued  redirection of a portion of their investments from the
  general account to separate accounts.
  
  Assets  under  management  is generally a key  determinant  of earnings for this
  segment.  For the six months ended June 30, assets under  management and related
  activity, including amounts attributable to separate accounts, were as follows:
  
  ==================================================================
  (In millions)                                  1998           1997
  ------------------------------------------------------------------
  Balance -- January 1                        $46,074        $40,605
  Premiums and deposits                         3,851          3,607
  Investment results                            1,475          1,201
  Increase in fair value of assets              1,983          1,711
  Customer withdrawals                         (2,258)        (1,220)
  Other, including participant
  withdrawals and benefit payments             (2,852)        (1,993)
  ------------------------------------------------------------------
  Balance -- June 30                          $48,273        $43,911
  ==================================================================
  
  Premiums and deposits increased 7% in the six months of 1998,  compared with the
  same  period  in 1997,  primarily  reflecting  higher  recurring  deposits  from
  existing customers.  For the six months of 1998 and 1997,  approximately 53% and
  48%,  respectively,  of premiums and deposits  reflect  recurring  deposits from
  existing  customers while the remaining amounts represent sales to new customers
  and new plan sales to existing  customers.  Investment  results increased 23% in
  the six months of 1998,  compared  with the same period in 1997.  This  increase
  reflects  higher capital gains and growth in assets,  partially  offset by lower
  investment  yields.  The increase for 1998 in the fair value of assets is due to
  market value  appreciation of equity  securities in separate  accounts and, to a
  lesser  extent,  market value  appreciation  of fixed  maturities in the general
  account.  The increase in customer withdrawals is primarily due to the effect of
  one customer  withdrawal  in the second  quarter of 1998.  The increase in Other
  reflects larger  participant  withdrawals  and benefit  payments due to a higher
  level of assets under management.
  
  Management expects asset growth to continue to be constrained due to the lack of
  growth in the defined benefit market. In addition,  assets under management will
  continue to be affected by market value  fluctuations  for fixed  maturities and
  equity securities.
  
                                         15
  <PAGE>
  INDIVIDUAL FINANCIAL SERVICES
  =================================================================
  FINANCIAL SUMMARY          Three Months Ended    Six Months Ended
                                   June 30,             June 30,
  (In millions)                 1998       1997      1998      1997
  -----------------------------------------------------------------
  Premiums and fees             $159       $249      $314      $483
  Net investment income          166        271       336       531
  Other revenues                  25         15       367        29
  Realized investment gains                  
  (losses)                        (1)        (2)        7        11
                           ----------------------------------------
  Total revenues                 349        533     1,024     1,054
  Benefits and expenses          296        461       584       897
                           ----------------------------------------
  Income before taxes             53         72       440       157
  Income taxes                    16         25       155        55
                           ----------------------------------------
  Net income                     $37        $47      $285      $102
  -------------------------========================================
  Realized investment gains
  (losses), net of taxes         $--        ($1)       $5        $7
  -------------------------========================================
  
  Net income for the  Individual  Financial  Services  segment  decreased  for the
  second quarter of 1998 and increased  substantially  for the six months of 1998,
  compared  with the same  periods  of 1997.  Results  for the six  months of 1998
  include an  after-tax  gain of $202 million  recognized  upon the closing of the
  sale of the individual life insurance and annuity businesses and results for the
  second  quarter and six months  include  $16 million and $33 million  after-tax,
  respectively, from recognition of a portion of the deferred gain associated with
  the sale (as discussed on page 11).  Excluding these amounts,  operating  income
  for the second  quarter and six months of 1998 was $21 million and $45  million,
  respectively.  These amounts,  compared with operating income of $25 million and
  $51 million for the same periods in 1997 (excluding  results from the businesses
  sold),  primarily  reflect  unfavorable  claim  experience  in  the  reinsurance
  operation,  partially offset by growth in interest-sensitive  and specialty life
  reinsurance products.
  
  For the second  quarter and six months of 1998,  premiums and fees decreased 36%
  and 35%,  respectively,  compared with the same periods of 1997.  Excluding 1997
  premiums and fees related to the  businesses  sold,  the increase for the second
  quarter and six months of 1998 was 11% and 14%,  respectively.  These  increases
  reflect growth in reinsurance and higher renewal premiums for interest-sensitive
  products.
  
  Net  investment  income  decreased  39% and 37% for the second  quarter  and six
  months of 1998, respectively,  compared with the same periods of 1997. Excluding
  1997 net investment  income related to the businesses sold, the increase for the
  second  quarter  and six  months  of 1998  was 9% and 11%,  respectively.  These
  increases primarily reflect growth in interest-sensitive products.
  
  In 1996,  Congress passed  legislation that phases out over a three-year  period
  the tax deductibility of policy loan interest for most leveraged corporate-owned
  life insurance (COLI)  products.  For the second quarter and six months of 1998,
  revenues of $139  million and $284 million and  operating  income of $11 million
  and $21  million,  respectively,  were from  leveraged  COLI  products  that are
  affected  by this  legislation.  The effect of this  legislation  on  customers'
  decisions to maintain  these  policies  after the  phase-out  period is unknown.
  However, all or a portion of these policies could lapse.
  
  PROPERTY AND CASUALTY
  =================================================================
  FINANCIAL SUMMARY            Three Months Ended  Six Months Ended
                                   June 30,            June 30,
  (In millions)                   1998      1997     1998     1997
  -----------------------------------------------------------------
  Premiums and fees             $1,070    $1,064   $2,032   $2,069
  Net investment income            180       189      353      384
  Other revenues                    67        65      136      137
  Realized investment gains          3        11       22       24
                          -----------------------------------------
  Total revenues                 1,320     1,329    2,543    2,614
  Benefits and expenses          1,237     1,238    2,368    2,428
                          -----------------------------------------
  Income before taxes               83        91      175      186
  Income taxes                      27        25       57       55
                          -----------------------------------------
  Net income                       $56       $66     $118     $131
  ------------------------=========================================
  Realized investment
  gains, net of taxes               $1        $7      $13      $15
  ------------------------=========================================
  
  Net income for the Property and Casualty  segment  decreased 15% and 10% for the
  second  quarter  and six months of 1998,  respectively,  compared  with the same
  periods last year.
  
                                         16
  <PAGE>
  Operating  income  decreased 7% and 9% for the second  quarter and six months of
  1998, respectively, compared with the same periods in 1997. Operating income for
  the ongoing and run-off operations was as follows:
  
  =================================================================
                             Three Months Ended    Six Months Ended
                                   June 30,             June 30,
  (In millions)                 1998      1997       1998      1997
  -----------------------------------------------------------------
  Ongoing operations:
    International                $28       $36        $59       $69
    Domestic                      27        23         46        46
                          -----------------------------------------
      Total ongoing
        operations                55        59        105       115
  Run-off operations              --        --         --         1
  -----------------------------------------------------------------
      Total                      $55       $59       $105      $116
  =================================================================
  
  The  decline in the  international  operations  for the second  quarter  and six
  months of 1998 primarily  reflects  lower property and casualty  earnings due to
  unfavorable  claim  experience and the  competitive  environment,  and lower net
  investment  income.  Partially  offsetting the decline were  improvements in the
  international life and health operations (primarily in Japan) and the absence of
  a  $6  million  after-tax  charge  for  cost  reduction  initiatives,  primarily
  severance, recorded in the second quarter of 1997.
  
  The increase in the domestic  operations in the second  quarter of 1998 reflects
  improved  claim  experience  in the  commercial  package and  property  lines of
  business   partially   offset  by  unfavorable   claim  experience  in  workers'
  compensation  and lower net  investment  income.  For the six months,  operating
  income  was  level  with  the  prior  year  reflecting  overall  improved  claim
  experience, offset by lower net investment income.
  
  Results for the run-off  operations  primarily reflect prior year development on
  claim and claim adjustment expense reserves and investment activity.
  
  Premiums and fees  increased  1% for the second  quarter and declined 2% for the
  six months of 1998.  These modest changes reflect  continued  price  competition
  and, for international, the unfavorable effect of foreign exchange.
  
  Net investment  income decreased 5% and 8% for the second quarter and six months
  of 1998,  respectively,  compared  with the same  periods of 1997.  The declines
  reflect lower average assets,  the unfavorable  effect of foreign exchange and a
  shift  in  the  investment   portfolio  mix  from  fixed  maturities  to  equity
  securities.
  
  The ongoing  operations  had pre-tax  catastrophe  losses of $10 million and $30
  million for the second  quarter and six months of 1998,  respectively,  compared
  with $2 million  and $14 million  for the same  periods of 1997.  The effects of
  reinsurance on catastrophe losses for the periods presented were not material.
  
  Effective July 1, 1998, CIGNA revised its reinsurance programs. CIGNA's domestic
  reinsurance  programs  provide  for  approximately  60%  recovery  for  property
  catastrophe  losses  between  $45 million and $260  million.  Other  reinsurance
  programs  are  in  place  which  could  provide  for  the  recovery  of up to an
  additional  $300 million on certain  losses,  including  property  catastrophes,
  depending  on  the   aggregate   annual  level  of  losses   incurred.   CIGNA's
  international  catastrophe program provides approximately 95% recovery of losses
  between $100 million and $400  million.  CIGNA's  future  results of  operations
  could  be  volatile,   depending  on  the   frequency  and  severity  of  future
  catastrophes.
  
  Certain  competitors  and  policyholders  of CIGNA are  challenging in court the
  restructuring of its domestic  property and casualty  business into two separate
  operations,  ongoing and  run-off.  Although  CIGNA  expects the matter to be in
  litigation for some time, it expects to ultimately prevail.
  
                                         17
  <PAGE>
  LOSS RESERVES AND REINSURANCE RECOVERABLES
  
  CIGNA's reserving methodology and significant issues affecting the estimation of
  loss reserves and reinsurance recoverables are described in its 1997 Form 10-K.
  
  CIGNA's  property and casualty  loss reserves of $15.0 billion and $15.1 billion
  as of June 30, 1998 and  December  31,  1997,  respectively,  are an estimate of
  future  payments  for  reported  and  unreported  claims for losses and  related
  expenses with respect to insured events that have occurred. The basic assumption
  underlying  the  many  traditional  actuarial  and  other  methods  used  in the
  estimation of property and casualty loss reserves is that past  experience is an
  appropriate  basis for  predicting  future events.  However,  current trends and
  other factors that would modify past experience are also considered. The process
  of  establishing  loss  reserves  is subject to  uncertainties  that are normal,
  recurring and inherent in the property and casualty business.
  
  CIGNA  continually  attempts to improve its loss estimation  process by refining
  its  analysis  of  loss   development   patterns,   claims  payments  and  other
  information,  but there remain many reasons for adverse development of estimated
  ultimate   liabilities.   For   example,   unanticipated   changes  in  workers'
  compensation and product liability laws have at times significantly affected the
  ability of  insurers  to  estimate  liabilities  for unpaid  losses and  related
  expenses.
  
  Reserving  for  property  and  casualty  claims  continues  to be a complex  and
  uncertain  process,  requiring  the use of  informed  estimates  and  judgments.
  CIGNA's  estimates and judgments  may be revised as  additional  experience  and
  other data become available and are reviewed,  as new or improved  methodologies
  are  developed or as current law  changes.  Any such  revisions  could result in
  future changes in estimates of losses or reinsurance recoverables,  and would be
  reflected in CIGNA's results of operations for the period in which the estimates
  are  changed.  While the effect of any such  changes in  estimates  of losses or
  reinsurance  recoverables  could be  material to future  results of  operations,
  CIGNA does not expect such changes to have a material effect on its liquidity or
  financial condition.
  
  CIGNA  manages  its  loss  exposure  through  the  use  of  reinsurance.   While
  reinsurance  arrangements  are designed to limit losses from large exposures and
  to permit recovery of a portion of direct losses,  reinsurance  does not relieve
  CIGNA of liability to its insureds. Accordingly, CIGNA's loss reserves represent
  total  gross  losses,  and  reinsurance   recoverables   represent   anticipated
  recoveries of a portion of those losses.
  
  CIGNA's  reinsurance  recoverables  were  approximately  $5.9  billion  and $6.2
  billion  as of June 30,  1998 and  December  31,  1997,  net of  allowances  for
  unrecoverable reinsurance of $707 million and $720 million, respectively.
  
  In management's judgment, information currently available has been appropriately
  considered in estimating CIGNA's loss reserves and reinsurance recoverables.
  
  The  following  table  shows the  adverse  (favorable)  pre-tax  effects  on the
  Property  and  Casualty   segment's   results  of  operations  from  prior  year
  development, net of reinsurance, for the quarter and six months ended June 30:
  
  =================================================================
                              Three Months Ended   Six Months Ended
                                   June 30,             June 30,
  (In millions)                 1998       1997      1998      1997
  -----------------------------------------------------------------
  By business operation:
    Ongoing operations            $3        $(7)       $5       $14
    Run-off operations            47         47        93       100
  -----------------------------------------------------------------
  Total                          $50        $40       $98      $114
  =================================================================
  By type of loss:
    Asbestos-related             $19        $27       $37       $48
    Environmental pollution        8          8        15        14
    Unrecoverable
       reinsurance                 5          3        14         9
    Workers' compensation         14          6        24        18
    Other                          4         (4)        8        25
  -----------------------------------------------------------------
  Total                          $50        $40       $98      $114
  =================================================================
  
  OTHER OPERATIONS
  
  Other Operations  primarily includes  unallocated  investment  income,  expenses
  (including  debt  service) and taxes.  Also  included are the results of CIGNA's
  settlement  annuity business and non-insurance  operations  engaged primarily in
  investment and real estate activities and certain new business initiatives.
  
                                         18
  <PAGE>
  Excluding realized investment results,  Other Operations had operating losses of
  $14  million  and $37  million  for the second  quarter  and six months of 1998,
  respectively,  compared  with losses of $16 million and $31 million for the same
  periods  in 1997.  The  improvement  for the second  quarter  of 1998  primarily
  reflects lower operating expenses while the increase in operating losses for the
  six months primarily  reflects  financing costs associated with the Healthsource
  acquisition and increased expenses related to new business initiatives.
  
  LIQUIDITY AND CAPITAL RESOURCES
  
  Liquidity  for CIGNA  and its  insurance  subsidiaries  has  remained  strong as
  evidenced by  significant  amounts of short-term  investments  and cash and cash
  equivalents   in  the  aggregate.   Generally,   CIGNA  has  met  its  operating
  requirements  by maintaining  appropriate  levels of liquidity in its investment
  portfolio and through utilization of overall positive cash flows.
  
  For the six months of 1998,  cash and cash  equivalents  decreased  $722 million
  from $2.6 billion as of December  31, 1997.  This  decrease  primarily  reflects
  payments of dividends on and  repurchases of CIGNA common stock ($488  million),
  repayment of debt ($461 million),  net withdrawals from  contractholder  deposit
  funds ($375  million),  and cash used in operating  activities  ($103  million),
  reflecting  the timing of  operating  cash  receipts  and  disbursements.  These
  decreases were partially  offset by cash provided by investing  activities ($696
  million),  which  includes  net  proceeds  on the  sale of the  individual  life
  insurance and annuity businesses of approximately $1.3 billion, partially offset
  by net investment purchases.
  
  CIGNA's  capital  resources  represent  funds  available for long-term  business
  commitments.  They primarily  consist of retained earnings and proceeds from the
  issuance of long-term debt and equity  securities.  CIGNA's  financial  strength
  provides the capacity and flexibility to enable it to raise funds in the capital
  markets  through the  issuance of such  securities.  CIGNA  continues to be well
  capitalized, with sufficient borrowing capacity to meet the anticipated needs of
  its businesses.
  
  CIGNA had $1.4 billion and $1.5 billion of long-term  debt  outstanding  at June
  30,  1998 and  December  31,  1997.  As of June 30,  1998,  CIGNA had $1 billion
  remaining  under  effective  shelf   registration   statements  filed  with  the
  Securities and Exchange Commission that may be issued as debt securities, equity
  securities  or both,  depending  upon  market  conditions  and  CIGNA's  capital
  requirements.
  
  In July 1998,  CIGNA completed an offer to exchange its 8.3% Step Down Notes due
  2033 (New Notes) for 8.3% Notes due 2023 (Old Notes).  Old Notes with  principal
  amounts  aggregating  approximately $83 million were tendered in connection with
  the exchange offer. The New Notes bear interest at 8.3% through January 14, 2023
  and 8.08% to January 15, 2033. The New Notes may be redeemed at CIGNA's  option,
  at any time,  at par plus a possible  additional  redemption  payment.  Expenses
  incurred in connection with the exchange were not material.
  
  At June 30, 1998,  CIGNA's  short-term debt amounted to $254 million, a decrease
  of $436 million from December 31, 1997.
  
  In April 1998,  CIGNA's Board of Directors  increased  CIGNA's  authorization to
  repurchase its common stock by $750 million.  Stock  repurchases  will depend on
  prevailing  market  conditions and alternative  uses of capital.  From January 1
  through July 30, 1998, CIGNA has repurchased  approximately 6,343,500 shares for
  $432 million,  including 835,000 shares repurchased for $61 million during July.
  The remaining authorization as of July 30, 1998 was $679 million.
  
                                         19
  <PAGE>
  INVESTMENT ASSETS
  ==================================================================
                                        June 30,        December 31,
  (In millions)                             1998                1997
  ------------------------------------------------------------------
  Fixed maturities                       $32,920             $36,358
  Equity securities                        1,089                 854
  Mortgage loans                           9,503              10,859
  Real estate                                766                 769
  Other, primarily policy loans            7,129               7,738
  ------------------------------------------------------------------
  Total investment assets                $51,407             $56,578
  ==================================================================
  
  Additional information regarding CIGNA's investment assets is included in Note 4
  to the second quarter 1998 Financial Statements and Notes 2, 4 and 5 to the 1997
  Financial Statements as well as the 1997 Form 10-K.
  
  Investment  assets as of June 30, 1998 decreased 9% from December 31, 1997. This
  decrease primarily relates to investments which were included in the sale of the
  individual life insurance and annuity businesses.
  
  Significant   amounts  of  CIGNA's   investment   assets  are   attributable  to
  experience-rated   contracts  with   policyholders   (policyholder   contracts).
  Approximate  percentages of investments  attributable to policyholder  contracts
  were as follows:
  
  
  ==================================================================
                                           June 30,     December 31,
                                               1998             1997
  ------------------------------------------------------------------
  Fixed maturities                              31%              29%
  Mortgage loans                                58%              53%
  Real estate                                   63%              64%
  ==================================================================
  
  Fixed Maturities
  
  Investments in fixed  maturities  (bonds)  include  publicly  traded and private
  placement debt securities;  asset-backed  securities,  including  collateralized
  mortgage obligations (CMOs); and redeemable preferred stocks.
  
  As of June 30, 1998, the fair value of fixed maturities,  including policyholder
  share,  was greater than  amortized  cost by $2.0  billion,  compared  with $2.1
  billion as of  December  31,  1997.  The  decrease  in  unrealized  appreciation
  primarily  relates to bonds which were  included  in the sale of the  individual
  life insurance and annuity businesses.
  
       Potential Problem and Problem Bonds
  
  Potential  problem  bonds are fully  current  but judged by  management  to have
  certain  characteristics that increase the likelihood of problem classification.
  CIGNA had $44 million of potential problem bonds, including amounts attributable
  to policyholder  contracts, as of June 30, 1998, compared with $63 million as of
  December  31,  1997.  These  amounts  are net of $2 million  and $10  million of
  cumulative write-downs, respectively.
  
  CIGNA considers bonds that are delinquent or restructured as to terms, typically
  interest rate and, in certain cases,  maturity date,  problem bonds.  As of June
  30, 1998 and December  31,  1997,  CIGNA had problem  bonds,  including  amounts
  attributable to policyholder contracts, of $131 million and $137 million, net of
  related cumulative write-downs of $22 million and $30 million, respectively.
  
  CIGNA recognizes interest income on problem bonds only when payment is received.
  See the Summary on page 22 for the effect of  non-accruals  and  write-downs for
  bonds on policyholder contracts and on CIGNA's net income.
  
                                         20
  <PAGE>
  Mortgage Loans
  ==================================================================
                                         June 30,       December 31,
                                             1998               1997
  ------------------------------------------------------------------
  Mortgage loans (in millions)             $9,503            $10,859
  Property type:
     Retail facilities                        38%                40%
     Office buildings                          35                 34
     Apartment buildings                       15                 13
     Industrial                                 6                  5
     Hotels                                     4                  5
     Other                                      2                  3
  Total                                      100%               100%
  ==================================================================
  
  CIGNA's  investment  strategy  requires  diversification  of the  mortgage  loan
  portfolio. This strategy includes guidelines relative to property type, location
  and borrower to reduce its exposure to potential losses.
  
       Potential Problem and Problem Mortgage Loans
  
  Potential problem mortgage loans include:
  o   fully current loans that are judged by
      management to have certain characteristics that
      increase the likelihood of problem classification;
  o   fully current loans for which the borrower has
      requested restructuring; and
  o   loans  that  are 30 to 59  days  delinquent  with
      respect  to  interest  or principal payments.
  
  CIGNA had potential problem mortgage loans,  including  amounts  attributable to
  policyholder contracts, of $140 million as of June 30, 1998, and $191 million as
  of December 31, 1997,  net of related  valuation  reserves of $5 million and $41
  million, respectively.
  
  CIGNA's  problem  mortgage loans include  delinquent and  restructured  mortgage
  loans.  Delinquent  mortgage  loans  include  those on which  payment is overdue
  generally  60 days or more.  Restructured  mortgage  loans are those whose basic
  financial  terms have been  modified,  typically to reduce the interest  rate or
  extend the maturity date.
  
  CIGNA had problem mortgage loans, including amounts attributable to policyholder
  contracts,  of $133 million and $152  million,  net of valuation  reserves of $9
  million as of June 30, 1998 and December 31, 1997.
  
  CIGNA recognizes  interest income on problem mortgage loans only when payment is
  received.  See  the  Summary  on  page 22 for the  effect  of  non-accruals  and
  valuation  reserves for mortgage loans on policyholder  contracts and on CIGNA's
  net income.
  
  Real Estate
  
  As of June 30, 1998 and  December  31,  1997,  investment  real  estate,  net of
  reserves  and  write-downs,   included:   1)  $393  million  and  $414  million,
  respectively,  of real estate  held for the  production  of income,  and 2) $373
  million and $355 million,  respectively, of real estate held for sale, primarily
  properties acquired as a result of foreclosure of mortgage loans.
  
  See the Summary on page 22 for the effect of write-downs and valuation  reserves
  for real estate on policyholder contracts and on CIGNA's net income.
  
                                         21
  <PAGE>
  Summary
  
  The adverse (favorable) effects of write-downs and changes in valuation reserves
  as well as of non-accruals  on policyholder  contracts and on CIGNA's net income
  were as follows:
  
  <TABLE>
  <CAPTION>
  ----------------------------------------------------------------------------------------------------------------------
  <S>                      <C>         <C>           <C>         <C>           <C>         <C>           <C>         <C>
                                 Three Months Ended June 30,                             Six Months Ended June 30,
                          ---------------------------------------          --------------------------------------------
                               1998                      1997                      1998                       1997
                          ----------------          -------------          ----------------               -------------
                      Policy-                   Policy-                    Policy-                   Policy-
                       holder                    holder                     holder                    holder
  (In millions)     Contracts       CIGNA     Contracts        CIGNA     Contracts       CIGNA     Contracts       CIGNA
  ----------------------------------------------------------------------------------------------------------------------
  Write-downs and
  valuation
  reserves:
     Bonds                $--          $1            $1           $7            $1          $1            $7          $8
     Mortgage loans        --          --             4            4            (3)         (1)            6           5
     Real estate            1          --            --            1            (1)         --             1           2
  ----------------------------------------------------------------------------------------------------------------------
  Total                    $1          $1            $5          $12           $(3)        $--           $14         $15
  ======================================================================================================================
  Non-accruals:
     Bonds                 $1          $1            $1          $--            $2          $3            $3          $5
     Mortgage loans        (1)         --            --           --            (1)         --            (1)         --
  ----------------------------------------------------------------------------------------------------------------------
  Total                   $--          $1            $1          $--            $1          $3            $2          $5
  ======================================================================================================================
  </TABLE>
  
  Additional  losses from problem  investments  are expected to occur for specific
  investments   in  the  normal  course  of  business.   Assuming  no  significant
  deterioration   in   economic   conditions,    including   further   significant
  deterioration in Asian economies, CIGNA does not expect additional non-accruals,
  write-downs  and reserves to  materially  affect future  results of  operations,
  liquidity or financial  condition,  or to result in a significant decline in the
  aggregate carrying value of its assets.
  
  CAUTIONARY  STATEMENTS  FOR  PURPOSES  OF THE "SAFE  HARBOR"  PROVISIONS  OF THE
  PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
  
  Except for historical  information provided in this Management's  Discussion and
  Analysis of  Financial  Condition  and Results of  Operations,  statements  made
  throughout  this  document are  forward-looking  and contain  information  about
  financial results,  economic conditions,  trends and known uncertainties.  CIGNA
  cautions  the reader that actual  results  could  differ  materially  from those
  expected by CIGNA,  depending on the outcome of certain  factors  (some of which
  are  described  with  the  forward-looking  statements)  including:  1)  adverse
  catastrophe  experience in CIGNA's property and casualty businesses;  2) adverse
  property and casualty  loss  development  for events that CIGNA insured in prior
  years;  3) an  increase  in medical  costs in CIGNA's  health  care  operations,
  including increases in utilization and costs of medical services;  4) heightened
  competition,  particularly  price  competition,  reducing  product  margins  and
  constraining  growth in CIGNA's  businesses;  5) significant changes in interest
  rates;  and 6) the effect on CIGNA's  international  operations and  investments
  from further significant deterioration in Asian economies.
  
                                         22
  <PAGE>
  
  Part II.  OTHER INFORMATION
  
  Item 4.           Submission of Matters to a Vote of Security Holders.
                    ----------------------------------------------------
  
                    The Annual Meeting of  Shareholders  of CIGNA  Corporation was
                    held on April 22, 1998. At the meeting,  63,531,309  shares of
                    Common  Stock  were  represented  and  entitled  to vote,  and
                    72,129,426   shares  of  Common  Stock  were  outstanding  and
                    entitled to vote. CIGNA  shareholders  elected nominees to the
                    Board  of  Directors,   ratified  the   appointment  of  Price
                    Waterhouse  LLP (now known as  PricewaterhouseCoopers  LLP) as
                    independent accountants for 1998, and approved an amendment to
                    the Certificate of Incorporation.
  <TABLE>
  <CAPTION>
  <S>                                                           <C>                       <C>      
                                                                                          Votes
                                                                Votes For                 Withheld
                                                                ---------                 --------
  
                    Election of nominee to 
                    Board of Directors for
                    term expiring in April, 1999:
  
                    Peter N. Larson                             59,554,507                3,976,802
  
                    Election of nominees to
                    Board of Directors for 
                    terms expiring in April, 2001:
  
                    Robert P. Bauman                            59,535,124                3,996,185
                    Robert H. Campbell                          59,554,462                3,976,847
                    Charles R. Shoemate                         59,555,690                3,975,619
                    Louis W. Sullivan, M.D                      59,530,631                4,000,678
  </TABLE>
  
                    -------------------------------
  
  <TABLE>
  <CAPTION>
  <S>                                                 <C>                     <C>                     <C>   
                                                       Votes For         Votes Against             Abstentions
                                                       ---------         -------------             -----------
  
                    Ratification of                   63,406,873              74,421                  50,015
                    Price Waterhouse LLP 
                    (now known as   
                    PricewaterhouseCoopers
                    LLP) as Independent
                    Accountants
  
                    -------------------------------
  
                                         23
  <PAGE>
  
                                                       Votes For         Votes Against             Abstentions
                                                       ---------         -------------             -----------
  
                    Approval of Amendment              61,733,978          1,717,211                 80,120
                    to Article Fourth of the
                    Certificate of Incorporation
                    to increase the authorized
                    Common Stock from
                    200,000,000 shares, par
                    value $1.00 per share, to
                    600,000,000 shares, par
                    value $.25 per share, and
                    to effect a three-for-one
                    Common Stock split.
  </TABLE>
  
  
  Item 6.           Exhibits and Reports on Form 8-K.
  
                    (a)      See Exhibit Index.
  
                    (b)      During the quarterly  period ended June 30, 1998, and
                             as of the  filing  date,  CIGNA  filed the  following
                             Reports on Form 8-K:
  
                             o        dated July 30,  1998,  Item 5 - containing a
                                      news release  regarding  its second  quarter
                                      1998 results.
  
                             o        dated April 30, 1998,  Item 5 - containing a
                                      news  release  regarding  its first  quarter
                                      1998 results.
  
  
                                         24
  <PAGE>
  
                                      SIGNATURE
  
  
           Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
  the registrant has duly caused this report to be signed by the undersigned  duly
  authorized officer, on its behalf and in the capacity indicated.
  
  
  
                                              CIGNA CORPORATION
  
  
  
                                              By: /s/ Gary A. Swords
                                                 -------------------
                                                 Gary A. Swords
                                                 Vice President and
                                                 Chief Accounting Officer
  
  Date:    August 6, 1998
  
  
  
                                         25
  <PAGE>
  
                                    Exhibit Index
  
  <TABLE>
  <CAPTION>
                                                                         Method of
  Number            Description                                            Filing
  ------            -----------                                          ---------
  <S>              <C>                                                  <C>  
  3                 Restated Certificate of Incorporation                Filed herewith.
                    of the registrant effective as of
                    July 22, 1998
  
  4                 Description of Preferred Stock Purchase              Filed as Item 1 and
                    Rights, including the Amended and                    Exhibit 1 to the registrant's
                    Restated Rights Agreement dated as                   Form 8-A/A, Amendment
                    of July 22, 1998 between CIGNA                       No. 1, dated July 22, 1998
                    Corporation and First Chicago Trust                  and incorporated herein
                    Company of New York                                  by reference.
  
  10                Restated Restricted Stock Plan for                   Filed herewith.
                    Non-Employee Directors of CIGNA
                    Corporation dated as of April 22, 1998
  
  12                Computation of Ratio of                              Filed herewith.
                    Earnings to Fixed Charges
  
  27                Financial Data Schedule                              Included only in
                                                                         the EDGAR version
                                                                         of the Form 10-Q.
  
  
  
                                         26
  </TABLE>
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 119778}]
metadata_filer: {"company-data": {"conformed-name": "CIGNA CORP", "cik": "0000701221", "assigned-sic": "6321", "irs-number": "061059331", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "001-08323", "film-number": "98678758"}, "business-address": {"street1": "ONE LIBERTY PLACE 1650 MARKET ST", "street2": "PO BOX 7716", "city": "PHILADELPHIA", "state": "PA", "zip": "19192-1550", "phone": "2157616211"}, "mail-address": {"street1": "TWO LIBERTY PLACE 48TH FLOOR", "street2": "1601 CHESTNUT STREET", "city": "PHILADELPHIA", "state": "PA", "zip": "19192"}}
text: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 10-Q
  
                [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
  
                    For the quarterly period ended June 30, 1998
                                                   -------------
  
                                         OR
  
                [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
  
                    for the transition period from _____ to _____
  
                            Commission file number 1-8323
                                                   ------
  
                                  CIGNA Corporation
                       ---------------------------------------
               (Exact name of registrant as specified in its charter)
  
               Delaware                                  06-1059331
            -------------                                ----------
       (State or other jurisdiction                  (I.R.S. Employer
       of incorporation or organization)            Identification No.)
  
                        One Liberty Place, 1650 Market Street
                        Philadelphia, Pennsylvania 19192-1550
                       ---------------------------------------
                 (Address of principal executive offices) (Zip Code)
  
                 Registrant's telephone number, including area code:
                                   (215) 761-1000
                                   --------------
  
                                   Not Applicable
                       ---------------------------------------
                (Former name, former address and former fiscal year,
                            if changed since last report)
  
           Indicate by check mark whether the registrant (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
  1934  during  the  preceding  12 months  (or for such  shorter  period  that the
  registrant was required to file such reports),  and (2) has been subject to such
  filing requirements for the past 90 days.
  
                                                 Yes  x     No __
  
    As of June 30,  1998,  212,280,085  shares of the  issuer's  Common Stock were
  outstanding.
  CIGNA CORPORATION
  
                                        INDEX
  
                                                                          Page No.
                                                                          --------
  
  PART I.           FINANCIAL INFORMATION
  
                    Item 1. Financial Statements                             
  
                            Consolidated Income Statements                   1
                            Consolidated Balance Sheets                      2
                            Consolidated Statements of Comprehensive         
                             Income and Changes in Shareholders'
                             Equity                                          3
                            Consolidated Statements of Cash Flows            4
                            Notes to Financial Statements                    5
  
                    Item 2. Management's Discussion and
                            Analysis of Financial Condition
                             and Results of Operations                      11
  
  PART II.          OTHER INFORMATION
  
                    Item 4. Submission of Matters to a Vote of
                             Security Holders                               23
                    Item 6. Exhibits and Reports on Form 8-K                24
  
  SIGNATURE                                                                 25
       
  EXHIBIT INDEX                                                             26
  
  As used  herein,  "CIGNA"  refers  to one or more of CIGNA  Corporation  and its
  consolidated subsidiaries.
  Part I.  FINANCIAL  INFORMATION
  Item 1.  Financial Statements
  
  CIGNA  CORPORATION
  CONSOLIDATED INCOME STATEMENTS
  (In millions, except per share amounts)
  Three Months Ended                         Six Months Ended
                                                                     June 30,                                  June 30,
                                                               1998            1997                      1998            1997
  ==============================================================================================================================
  REVENUES
  Premiums and fees                                        $    4,115      $    3,482                 $   8,016      $    6,870
  Net investment income                                           942           1,062                     1,879           2,115
  Other revenues                                                  217             163                       731             323
  Realized investment gains                                        47              12                       106              56
                                                             ---------       ---------                  --------       ---------
      Total revenues                                            5,321           4,719                    10,732           9,364
                                                             ---------       ---------                  --------       ---------
  
  BENEFITS, LOSSES AND EXPENSES
  Benefits, losses and settlement expenses                      3,464           3,065                     6,797           6,074
  Policy acquisition expenses                                     239             270                       467             534
  Other operating expenses                                      1,147             973                     2,229           1,908
                                                             ---------       ---------                  --------       ---------
      Total benefits, losses and expenses                       4,850           4,308                     9,493           8,516
                                                             ---------       ---------                  --------       ---------
  
  INCOME BEFORE INCOME TAXES                                      471             411                     1,239             848
                                                             ---------       ---------                  --------       ---------
  
  Income taxes (benefits):
      Current                                                     176             124                       608             234
      Deferred                                                    (13)              8                      (172)             47
                                                             ---------       ---------                  --------       ---------
          Total taxes                                             163             132                       436             281
                                                             ---------       ---------                  --------       ---------
  
  NET INCOME                                               $      308      $      279                 $     803      $      567
  ----------------------------------------------------==========================================================================
  
  BASIC EARNINGS PER SHARE                                 $     1.44      $     1.26                 $    3.74      $     2.57
  ----------------------------------------------------==========================================================================
  
  DILUTED EARNINGS PER SHARE                               $     1.42      $     1.25                 $    3.70      $     2.55
  ----------------------------------------------------==========================================================================
  
  DIVIDENDS DECLARED PER SHARE                             $     0.29      $     0.28                 $    0.57      $     0.55
  ----------------------------------------------------==========================================================================
  The Notes to Financial Statements are an integral part of these statements.
  
                                         1
  CIGNA  CORPORATION
  CONSOLIDATED  BALANCE  SHEETS
  (In millions, except per share amounts)
  As of                          As of
                                                                                       June 30,                   December 31,
                                                                                         1998                          1997
  ==============================================================================================================================
  ASSETS
  Investments:
     Fixed maturities, at fair value (amortized cost, $30,931; $34,284)             $     32,920                  $      36,358
     Equity securities, at fair value (cost, $765; $648)                                   1,089                            854
     Mortgage loans                                                                        9,503                         10,859
     Policy loans                                                                          6,579                          7,253
     Real estate                                                                             766                            769
     Other long-term investments                                                             318                            273
     Short-term investments                                                                  232                            212
                                                                                      -----------                   ------------
         Total investments                                                                51,407                         56,578
  Cash and cash equivalents                                                                1,903                          2,625
  Accrued investment income                                                                  856                            868
  Premiums, accounts and notes receivable                                                  4,528                          4,265
  Reinsurance recoverables                                                                12,400                          6,753
  Deferred policy acquisition costs                                                          951                          1,542
  Property and equipment                                                                     858                            857
  Deferred income taxes                                                                    1,924                          1,788
  Other assets                                                                             1,146                          1,033
  Goodwill and other intangibles                                                           2,490                          2,542
  Separate account assets                                                                 32,464                         29,348
  ------------------------------------------------------------------------------------------------------------------------------
  
          Total assets                                                              $    110,927                  $     108,199
  ------------------------------------------------------------------------------------==========================================
  
  LIABILITIES
  Contractholder deposit funds                                                      $     30,524                  $      30,682
  Unpaid claims and claim expenses                                                        17,841                         17,906
  Future policy benefits                                                                  12,093                         11,976
  Unearned premiums                                                                        1,839                          1,774
                                                                                      -----------                   ------------
           Total insurance and contractholder liabilities                                 62,297                         62,338
  Accounts payable, accrued expenses and other liabilities                                 6,216                          6,562
  Current income taxes                                                                       159                             60
  Short-term debt                                                                            254                            690
  Long-term debt                                                                           1,440                          1,465
  Separate account liabilities                                                            32,221                         29,152
  ------------------------------------------------------------------------------------------------------------------------------
           Total liabilities                                                             102,587                        100,267
  ------------------------------------------------------------------------------------------------------------------------------
  
  CONTINGENCIES - NOTE 9
  
  SHAREHOLDERS' EQUITY
  Common stock (par value, $.25; shares issued, 265; 264)                                     66                             66
  Additional paid-in capital                                                               2,704                          2,655
  Net unrealized appreciation - fixed maturities                           $    745                      $    752
  Net unrealized appreciation - equity securities                               212                           132
  Net translation of foreign currencies                                        (122)                         (126)
                                                                             -------                       -------
     Accumulated other comprehensive income                                                  835                            758
  Retained earnings                                                                        6,376                          5,696
  Less treasury stock, at cost                                                            (1,641)                        (1,243)
  ------------------------------------------------------------------------------------------------------------------------------
           Total shareholders' equity                                                      8,340                          7,932
  ------------------------------------------------------------------------------------------------------------------------------
  
           Total liabilities and shareholders' equity                               $    110,927                  $     108,199
  ------------------------------------------------------------------------------------==========================================
  
  SHAREHOLDERS' EQUITY PER SHARE                                                    $      39.29                  $       36.55
  ------------------------------------------------------------------------------------==========================================
  The Notes to Financial Statements are an integral part of these statements.
  
                                          2
  CIGNA  CORPORATION
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND CHANGES IN
      SHAREHOLDERS' EQUITY
  (In millions)
  Three Months Ended June 30,                                                             1998                        1997
  -----------------------------------------------------------------------------------------------------------------------------------
                                                                                  Compre-       Share-        Compre-         Share-
                                                                                  hensive      holders'       hensive        holders'
                                                                                   Income       Equity         Income         Equity
  ===================================================================================================================================
  Common stock                                                                              $        66                 $        66
                                                                                              ----------                  ----------
  Additional paid-in capital - April 1                                                            2,695                       2,605
    Issuance of common stock for employee benefits plans                                              9                          27
                                                                                              ----------                  ----------
  Additional paid-in capital - June 30                                                            2,704                       2,632
                                                                                              ----------                  ----------
  
  Accumulated other comprehensive income - April 1                                                  812                         307
    Net unrealized appreciation - fixed maturities                            $        22            22     $       174         174
    Net unrealized appreciation (depreciation) - equity securities                     (2)           (2)             35          35
                                                                                ----------                    ----------
        Net unrealized appreciation on securities                                      20                           209
    Net translation of foreign currencies                                               3             3             (20)        (20)
                                                                                ----------                    ----------
            Other comprehensive income                                                 23                           189
                                                                                              ----------                  ----------
  Accumulated other comprehensive income - June 30                                                  835                         496
                                                                                              ----------                  ----------
  
  Retained earnings - April 1                                                                     6,129                       5,082
    Net income                                                                        308           308             279         279
    Common dividends declared                                                                       (61)                        (62)
                                                                                              ----------                  ----------
  Retained earnings - June 30                                                                     6,376                       5,299
                                                                                              ----------                  ----------
  
  Treasury stock - April 1                                                                       (1,377)                       (943)
    Repurchase of common stock                                                                     (260)                         --
    Other treasury stock transactions, net                                                           (4)                         (2)
                                                                                             ----------                  ----------
  Treasury stock - June 30                                                                       (1,641)                       (945)
  ----------------------------------------------------------------------------------------------------------------------------------
  TOTAL COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY                         $       331   $     8,340     $       468 $     7,548
  ------------------------------------------------------------------------------====================================================
  
  Six Months Ended June 30,
  ----------------------------------------------------------------------------------------------------------------------------------
  Common stock                                                                              $        66                 $        66
                                                                                              ----------                  ----------
  
  Additional paid-in capital - January 1                                                          2,655                       2,594
    Issuance of common stock for employee benefits plans                                             49                          38
                                                                                              ----------                  ----------
  Additional paid-in capital - June 30                                                            2,704                       2,632
                                                                                             ----------                  ----------
  
  Accumulated other comprehensive income - January 1                                                758                         582
    Net unrealized depreciation - fixed maturities                            $        (7)           (7)    $      (106)       (106)
    Net unrealized appreciation - equity securities                                    80            80              48          48
                                                                                ----------                    ----------
        Net unrealized appreciation (depreciation) on securities                       73                           (58)
    Net translation of foreign currencies                                               4             4             (28)        (28)
                                                                                ----------                    ----------
            Other comprehensive income (loss)                                          77                           (86)
                                                                                              ----------                  ----------
  Accumulated other comprehensive income - June 30                                                  835                         496
                                                                                              ----------                  ----------
  Retained earnings - January 1                                                                   5,696                       4,855
    Net income                                                                        803           803             567         567
    Common dividends declared                                                                      (123)                       (123)
                                                                                              ----------                  ----------
  Retained earnings - June 30                                                                     6,376                       5,299
                                                                                              ----------                  ----------
  Treasury stock - January 1                                                                     (1,243)                       (889)
    Repurchase of common stock                                                                     (371)                        (49)
    Other treasury stock transactions, net                                                          (27)                         (7)
                                                                                             ----------                  ----------
  Treasury stock - June 30                                                                       (1,641)                       (945)
  ----------------------------------------------------------------------------------------------------------------------------------
  TOTAL COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY                         $       880   $     8,340     $       481 $     7,548
  ------------------------------------------------------------------------------====================================================
  The Notes to Financial Statements are an integral part of these statements.
  
                                          3
  CIGNA  CORPORATION
  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
  (In millions)
  Six Months Ended June 30,
                                                                                          1998                        1997
  ===========================================================================================================================
  CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                                                      $       803                 $       567
      Adjustments to reconcile net income to net cash
          provided by (used in) operating activities:
              Insurance liabilities                                                           324                        (256)
              Reinsurance recoverables                                                        224                         399
              Deferred policy acquisition costs                                               (70)                        (71)
              Premiums, accounts and notes receivable                                        (265)                        (36)
              Accounts payable, accrued expenses, other liabilities and
                  current income taxes                                                       (357)                       (180)
              Deferred income taxes                                                          (172)                         47
              Realized investment gains                                                      (106)                        (56)
              Depreciation and goodwill amortization                                          156                          99
              Gain on sale of businesses                                                     (367)                         --
              Other, net                                                                     (273)                       (160)
                                                                                        ----------                  ----------
                  Net cash provided by (used in) operating activities                        (103)                        353
                                                                                        ----------                  ----------
  
  CASH FLOWS FROM INVESTING ACTIVITIES
      Proceeds from investments sold:
          Fixed maturities                                                                  3,688                       3,128
          Equity securities                                                                   173                         148
          Mortgage loans                                                                      562                         322
          Other (primarily short-term investments)                                          1,169                       2,279
      Investment maturities and repayments:
          Fixed maturities                                                                  1,928                       1,974
          Mortgage loans                                                                      348                         241
      Investments purchased:
          Fixed maturities                                                                 (5,277)                     (4,905)
          Equity securities                                                                  (353)                       (193)
          Mortgage loans                                                                     (920)                       (714)
          Other (primarily short-term investments)                                         (1,739)                     (1,689)
      Net cash from acquisitions and dispositions                                           1,296                      (1,288)
      Other, net                                                                             (179)                        (75)
                                                                                        ----------                  ----------
                  Net cash provided by (used in) investing activities                         696                        (772)
                                                                                        ----------                  ----------
  
  CASH FLOWS FROM FINANCING ACTIVITIES
      Deposits and interest credited to contractholder deposit funds                        4,430                       3,656
      Withdrawals and benefit payments from contractholder deposit funds                   (4,805)                     (3,576)
      Net change in short-term debt                                                          (362)                        146
      Issuance of long-term debt                                                               --                         600
      Repayment of long-term debt                                                             (99)                        (26)
      Repurchase of common stock                                                             (366)                        (55)
      Issuance of common stock                                                                 17                           3
      Common dividends paid                                                                  (122)                       (122)
                                                                                        ----------                  ----------
                  Net cash provided by (used in) financing activities                      (1,307)                        626
                                                                                        ----------                  ----------
  Effect of foreign currency rate changes on cash and cash equivalents                         (8)                        (23)
  ----------------------------------------------------------------------------------------------------------------------------
  Net increase (decrease) in cash and cash equivalents                                       (722)                        184
  Cash and cash equivalents, beginning of period                                            2,625                       1,760
  ----------------------------------------------------------------------------------------------------------------------------
  
  Cash and cash equivalents, end of period                                            $     1,903                 $     1,944
  --------------------------------------------------------------------------------------======================================
  
  Supplemental Disclosure of Cash Information:
      Income taxes paid, net of refunds                                               $       494                 $       311
      Interest paid                                                                   $        66                 $        47
  ----------------------------------------------------------------------------------------------------------------------------
  The Notes to Financial Statements are an integral part of these statements.
  
                                          4
  CIGNA CORPORATION
  NOTES TO FINANCIAL STATEMENTS
  
  NOTE 1 - BASIS OF PRESENTATION
  
  The consolidated  financial statements include the accounts of CIGNA Corporation
  and  all  significant   subsidiaries  (CIGNA).   These  consolidated   financial
  statements have been prepared in conformity with generally  accepted  accounting
  principles.  Certain  reclassifications  have been made to conform with the 1998
  presentation.
  
  The interim  financial  statements  are  unaudited  but include all  adjustments
  (consisting  of normal  recurring  adjustments)  necessary,  in the  opinion  of
  management, for a fair statement of financial position and results of operations
  for the periods reported.
  
  The preparation of interim financial  statements  necessarily  relies heavily on
  estimates.  This and  certain  other  factors,  such as the  seasonal  nature of
  portions of the  insurance  business  as well as  competitive  and other  market
  conditions,  call for  caution  in drawing  specific  conclusions  from  interim
  results.
  
  On April 22, 1998, CIGNA's  shareholders  approved a three-for-one  common stock
  split,  an increase in the number of common shares  authorized for issuance from
  200 million to 600 million and a decrease in the par value of common  stock from
  $1 per share to $0.25 per share.  The additional  shares were distributed on May
  15, 1998, to  shareholders  of record as of May 4, 1998. The reduction in common
  stock and  corresponding  increase in additional  paid-in capital of $22 million
  reflects these actions and all share data have been  retroactively  adjusted for
  the stock split as though the split had occurred at the beginning of the periods
  presented.
  
  NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS
  
  In 1998, the Financial  Accounting  Standards  Board (FASB) issued  Statement of
  Financial  Accounting  Standards  (SFAS) No.  133,  "Accounting  for  Derivative
  Instruments and Hedging  Activities."  SFAS No. 133 requires that derivatives be
  reported  on the  balance  sheet  at  fair  value.  Changes  in fair  value  are
  recognized  in net income or, for  derivatives  which are  hedging  market  risk
  related to future cash flows,  in the  accumulated  other  comprehensive  income
  section of shareholders' equity. Implementation is required by the first quarter
  of 2000,  with the  cumulative  effect of adoption  reflected  in net income and
  accumulated other comprehensive income, as appropriate. CIGNA has not determined
  the effect or timing of implementation of this pronouncement.
  
  In 1997,  the FASB  issued  SFAS No.  131,  "Disclosures  about  Segments  of an
  Enterprise  and Related  Information,"  which could  change the way segments are
  structured and require additional segment  disclosure.  CIGNA has not determined
  the effect or timing of implementation of this pronouncement,  which is required
  by December 31, 1998.
  
  The American Institute of Certified Public Accountants  (AICPA) issued Statement
  of Position  (SOP) 97-3,  "Accounting  by Insurance  and Other  Enterprises  for
  Insurance-Related  Assessments"  in 1997.  SOP  97-3  provides  guidance  on the
  recognition   and  measurement  of  liabilities  for  guaranty  fund  and  other
  insurance-related  assessments.  Implementation is required by the first quarter
  of 1999, with the cumulative  effect of adopting the SOP reflected in net income
  in the year of  adoption.  CIGNA  has not  determined  the  effect  or timing of
  implementation of this pronouncement.
  
  In 1998,  the AICPA  issued  SOP  98-1,  "Accounting  for the Costs of  Computer
  Software  Developed or Obtained for Internal  Use." SOP 98-1 specifies the types
  of costs that must be capitalized  and amortized  over the  software's  expected
  useful  life and the types of costs  which  must be  immediately  recognized  as
  expense. Implementation is required by the first quarter of 1999. Although CIGNA
  has not yet determined the timing of  implementation,  this pronouncement is not
  expected to have a
  
                                          5
  material effect on results of operations, liquidity or financial condition.
  
  NOTE 3 - ACQUISITIONS AND DISPOSITIONS
  
  As of January 1, 1998,  CIGNA sold its  individual  life  insurance  and annuity
  businesses for cash proceeds of $1.4 billion.  The sale resulted in an after-tax
  gain of $773  million of which $202 million was  recognized  upon closing of the
  sale.  Since the principal  agreement to sell these businesses is in the form of
  an indemnity reinsurance arrangement, the remaining $571 million of the gain was
  deferred and is being  recognized at the rate that earnings from the  businesses
  sold would have been  expected  to emerge,  primarily  over  fifteen  years on a
  declining basis. Also, as part of the transaction,  CIGNA recorded a reinsurance
  recoverable  from  the  purchaser  of $5.8  billion  for  insurance  liabilities
  retained and transferred invested assets of $5.4 billion along with other assets
  and liabilities associated with the businesses. The sales agreement provides for
  post-closing adjustments, however, any future adjustments are not expected to be
  material to results of operations, liquidity or financial condition.
  
  CIGNA acquired the outstanding common stock of Healthsource, Inc. (Healthsource)
  on June 25, 1997. The cost of the acquisition  was $1.7 billion,  reflecting the
  purchase of  Healthsource  common stock for $1.4 billion and the  retirement  of
  Healthsource  debt of $250  million.  The  acquisition  was  accounted  for as a
  purchase,  and was  financed  through  the  issuance of  long-term  debt of $600
  million and a combination of internally generated funds and short-term debt. The
  results  of  operations  of  Healthsource   are  included  in  the  accompanying
  consolidated  financial  statements from the date of  acquisition.  Healthsource
  revenues  that are not  included  in  CIGNA's  results of  operations  were $489
  million and $971 million for the second  quarter and six months of 1997. The pro
  forma effect on CIGNA's net income was not material.
  
  Goodwill  and  other   intangible   assets   associated  with  the  Healthsource
  acquisition  were $1.5  billion,  including  $24 million  recorded in the fourth
  quarter of 1997 for severance of Healthsource  employees,  vacated  Healthsource
  lease space and  adjustments  to  Healthsource  net assets to conform to CIGNA's
  accounting policies. As of June 30, 1998,  approximately $6 million of severance
  was paid to approximately  475 employees.  Goodwill and other intangible  assets
  are being amortized on a straight-line  basis over periods ranging from eight to
  40 years.
  
  CIGNA had other acquisitions and dispositions  during the six months of 1998 and
  1997, the effects of which were not material to the financial statements.
  
  NOTE 4 - INVESTMENTS
  
  Realized Investment Gains and Losses
  
  Realized gains and losses on investments,  excluding policyholder share, were as
  follows:
  
  ---------------------------------------------------------------------
                                   Three Months           Six Months
                                      Ended                  Ended
                                     June 30,              June 30,
  (In millions)                 1998         1997       1998       1997
  ---------------------------------------------------------------------
  Realized investment
   gains (losses):
       Fixed maturities          $14           $3        $46        $29
       Equity securities          16            9         20         14
       Mortgage loans             (7)          (1)         5        (14)
       Real estate                 6           (1)         7         17
       Other                      18            2         28         10
                           --------------------------------------------
                                  47           12        106         56
  Less income taxes               15            3         36         19
  ---------------------------------------------------------------------
  Net realized investment
  gains                          $32           $9        $70        $37
  -------------------------============================================
  
  Fixed Maturities and Equity Securities
  
  Sales of  available-for-sale  fixed maturities and equity securities,  including
  policyholder share, were as follows:
  
  ---------------------------------------------------------------------
                                 Three Months           Six Months
                                    Ended                  Ended
                                   June 30,              June 30,
  (In millions)               1998        1997        1998       1997
  ---------------------------------------------------------------------
  
  Proceeds from sales       $2,175      $1,689      $3,861     $3,276
  Gross gains on sales          90          67         141         86
  Gross losses on sales        (35)        (49)        (59)       (60)
  ---------------------------------------------------------------------
  
                                          6
  The components of unrealized  appreciation  (depreciation) on securities for the
  three and six months ended June 30 were as follows:
  ------------------------------------------------------------------
  (In millions)                                     1998        1997
  ------------------------------------------------------------------
  Three months ended June 30,
  
  Unrealized appreciation on securities held,
  net of taxes of $16 and $117, respectively.        $40        $217
  Less gains realized in net income, net of
  taxes of $10 and $4, respectively.                  20           8
                                               ---------------------
  Net unrealized appreciation                        $20        $209
  ---------------------------------------------=====================
  Six months ended June 30, 
  
  Unrealized  appreciation  (depreciation) on
  securities held, net of taxes (benefits) of
  $109 and $(14), respectively.                     $219        $(30)
  Less gains realized in net income, net of
  taxes of $78 and $15, respectively.                146          28
                                               ---------------------
  Net unrealized appreciation (depreciation)         $73        $(58)
  ---------------------------------------------=====================
  
  NOTE 5 - INCOME TAXES
  
  CIGNA's federal income tax returns are routinely audited by the Internal Revenue
  Service  (IRS),  and  provisions  are  made  in  the  financial   statements  in
  anticipation  of the results of these  audits.  The IRS completed its audits for
  the years 1982 through 1993, and challenged  CIGNA on one issue related to years
  prior to 1989.  During  the third  quarter  of 1997,  the U.S.  Tax Court  ruled
  against  CIGNA on this issue.  The decision did not have an effect on results of
  operations,  as liabilities had been previously established.  In connection with
  this matter,  CIGNA made payments of approximately  $250 million during 1997 and
  $115 million in the first quarter of 1998. CIGNA has appealed the U.S. Tax Court
  decision to the U.S. Court of Appeals.
  
  In management's opinion,  adequate tax liabilities have been established for all
  years.
  
  NOTE 6 - EARNINGS PER SHARE
  
  -------------------------------------------------------------------
                                                  Effect
  (Dollars in millions,                               of
  except per share amounts)           Basic     Dilution      Diluted
  -------------------------------------------------------------------
  
  Three Months Ended June 30,
  -------------------------------------------------------------------
  1998
  -------------------------------------------------------------------
  Net income                           $308           --         $308
  --------------------------------===================================
  Shares (in thousands):
  
  Weighted average                  213,831           --      213,831
  Options and restricted
  stock grants                                     2,715        2,715
  -------------------------------------------------------------------
  Total shares                      213,831        2,715      216,546
  --------------------------------===================================
  Earnings per share                  $1.44      $(0.02)        $1.42
  --------------------------------===================================
  1997
  -------------------------------------------------------------------
  Net income                           $279           --         $279
  --------------------------------===================================
  Shares (in thousands):
  
  Weighted average                  220,930           --      220,930
  Options and restricted
  stock grants                                     1,843        1,843
  -------------------------------------------------------------------
  Total shares                      220,930        1,843      222,773
  --------------------------------===================================
  Earnings per share                  $1.26      $(0.01)        $1.25
  --------------------------------===================================
  
  Six Months Ended June 30,
  -------------------------------------------------------------------
  1998
  -------------------------------------------------------------------
  Net income                           $803           --         $803
  --------------------------------===================================
  Shares (in thousands):
  
  Weighted average                  214,730           --      214,730
  Options and restricted
  stock grants                                     2,415        2,415
  -------------------------------------------------------------------
  Total shares                      214,730        2,415      217,145
  --------------------------------===================================
  Earnings per share                  $3.74      $(0.04)        $3.70
  --------------------------------===================================
  1997
  -------------------------------------------------------------------
  Net income                           $567           --         $567
  --------------------------------===================================
  Shares (in thousands):
  
  Weighted average                  220,690           --      220,690
  Options and restricted
  stock grants                                     1,838        1,838
  -------------------------------------------------------------------
  Total shares                      220,690        1,838      222,528
  --------------------------------===================================
  Earnings per share                  $2.57      $(0.02)        $2.55
  --------------------------------===================================
  
  Common shares held as Treasury  shares were 52,561,178 and 41,172,189 as of June
  30, 1998 and 1997, respectively.
  
                                          7
  NOTE 7 - REINSURANCE
  
  In the normal  course of business,  CIGNA's  insurance  subsidiaries  enter into
  agreements,  primarily relating to short-duration  contracts, to assume and cede
  reinsurance  with other insurance  companies.  Reinsurance is ceded primarily to
  limit losses from large  exposures and to permit recovery of a portion of direct
  losses,  although ceded reinsurance does not relieve the originating  insurer of
  liability.  CIGNA  evaluates  the  financial  condition  of its  reinsurers  and
  monitors  concentrations of credit risk arising from similar geographic regions,
  activities or economic characteristics of its reinsurers.
  
  Failure of reinsurers to indemnify CIGNA, as a result of reinsurer  insolvencies
  and disputes, could result in losses.  Allowances for uncollectible amounts were
  $707  million  and $720  million  as of June 30,  1998 and  December  31,  1997,
  respectively.
  
  Future charges for  unrecoverable  reinsurance may materially  affect results of
  operations in future periods,  however,  such amounts are not expected to have a
  material adverse effect on CIGNA's liquidity or financial condition.
  
  For the second  quarter  and six months of 1998,  premiums  and fees were net of
  ceded  premiums of $652 million and $1.1 billion,  respectively.  For the second
  quarter and six months of 1997,  premiums and fees were net of ceded premiums of
  $589 million and $1.0 billion,  respectively.  In addition, benefits, losses and
  settlement  expenses  for the second  quarter and six months of 1998 were net of
  reinsurance recoveries of $477 million and $862 million, respectively. Benefits,
  losses and  settlement  expenses  for the second  quarter and six months of 1997
  were  net  of   reinsurance   recoveries  of  $429  million  and  $687  million,
  respectively.
  
  NOTE 8 - COST REDUCTION INITIATIVES
  
  In the  fourth  quarter  of  1997,  CIGNA  adopted  a  cost  reduction  plan  to
  restructure  its health care  operations,  which resulted in a pre-tax charge of
  $32 million ($22 million  after-tax)  in the Employee  Life and Health  Benefits
  segment.  The charge  consisted  primarily of costs related to  severance,  real
  estate and other costs for office  closings.  The cash outlays  associated  with
  these  initiatives will continue through 1999 with most occurring in 1998. CIGNA
  has funded and will continue to fund the cash outlays through liquid assets, and
  such  funding  has not and  will  not  have a  material  adverse  effect  on its
  liquidity.  As of June 30, 1998,  approximately $3 million of severance was paid
  to approximately 535 employees.
  
  NOTE 9 - CONTINGENCIES AND OTHER MATTERS
  
  Financial Guarantees
  
  CIGNA,  through its subsidiaries,  is contingently  liable for various financial
  guarantees provided in the ordinary course of business. These include guarantees
  for the repayment of industrial  revenue bonds as well as other debt instruments
  and  guarantees  of a minimum  level of benefits  for certain  separate  account
  contracts.  Although the ultimate outcome of any loss contingencies arising from
  CIGNA's  financial  guarantees  may  adversely  affect  results of operations in
  future  periods,  they are not  expected  to have a material  adverse  effect on
  CIGNA's liquidity or financial condition.
  
                                          8
  Regulatory and Industry Developments
  
  CIGNA's  businesses  are  subject  to  a  changing  social,   economic,   legal,
  legislative  and  regulatory  environment  that could affect  them.  Some of the
  changes include initiatives to: 
  o   increase health care regulation; 
  o   revise the system of funding cleanup of
      environmental damages;
  o   reinterpret insurance contracts long after the
      policies were written to provide coverage
      unanticipated by CIGNA;
  o   restrict insurance pricing and the application of
      underwriting standards; and
  o   revise federal tax laws.
  
  Some of the more significant issues are discussed below.
  
  Efforts at the federal and state level to increase regulation of the health care
  industry could have an adverse effect on CIGNA's health care  operations if they
  reduce marketplace  competition and innovation or result in increased medical or
  administrative  costs.  Matters under  consideration  that could have an adverse
  effect  include  mandated  benefits  or services  that  increase  costs  without
  improving the quality of care, loss of the Employee  Retirement  Income Security
  Act of 1974  (ERISA)  preemption  of state  law and  restrictions  on the use of
  prescription drug formularies. Due to the uncertainty associated with the timing
  and content of any proposals  ultimately adopted,  the effect on CIGNA's results
  of operations,  liquidity or financial condition cannot be reasonably  estimated
  at this time.
  
  Proposed  legislation  for  Superfund  reform  remains  under  consideration  by
  Congress. Any changes in Superfund relating to 1) assigning  responsibility,  2)
  funding  cleanup costs or 3)  establishing  cleanup  standards  could affect the
  liabilities of policyholders and insurers. Due to uncertainties  associated with
  the  timing  and  content of any  future  Superfund  legislation,  the effect on
  CIGNA's  results of  operations,  liquidity  or  financial  condition  cannot be
  reasonably estimated at this time.
  
  In 1996,  Congress passed  legislation that phases out over a three-year  period
  the tax deductibility of policy loan interest for most leveraged corporate-owned
  life  insurance  products.  CIGNA does not  expect  this  legislation  to have a
  material  effect  on  its  consolidated  results  of  operations,  liquidity  or
  financial condition.
  
  The  National  Association  of  Insurance   Commissioners  (NAIC)  is  currently
  addressing  risk-based capital  guidelines for health maintenance  organizations
  (HMOs).  CIGNA does not expect such guidelines to have a material adverse effect
  on its future results of operations, liquidity or financial condition.
  
  In 1998, the NAIC adopted standardized  statutory accounting  principles.  Since
  these  principles  have not yet been  adopted by the  insurance  departments  of
  various jurisdictions in which CIGNA's insurance subsidiaries are domiciled, the
  timing or effects of implementation have not yet been determined.
  
  The eventual  effect on CIGNA of the changing  environment  in which it operates
  remains uncertain.
  
  Property and Casualty Unpaid Claims and Claim Expense Reserves and Reinsurance
  Recoverables
  
  CIGNA's  property and casualty loss reserves are an estimate of future  payments
  for reported and unreported  claims for losses and related expenses with respect
  to insured events that have occurred.  The basic assumption  underlying the many
  traditional  actuarial and other methods used in the  estimation of property and
  casualty  loss  reserves is that past  experience  is an  appropriate  basis for
  predicting future events.  However,  current trends and other factors that would
  modify past experience are also  considered.  The process of  establishing  loss
  reserves is subject to uncertainties that are normal,  recurring and inherent in
  the property and casualty business.
  
                                          9
  Reserving  for  property  and  casualty  claims  continues  to be a complex  and
  uncertain  process,  requiring  the use of  informed  estimates  and  judgments.
  CIGNA's  estimates and judgments  may be revised as  additional  experience  and
  other data become available and are reviewed,  as new or improved  methodologies
  are  developed or as current law  changes.  Any such  revisions  could result in
  future changes in estimates of losses or reinsurance recoverables,  and would be
  reflected in CIGNA's results of operations for the period in which the estimates
  are  changed.  While the effect of any such  changes in  estimates  of losses or
  reinsurance  recoverables  could be  material to future  results of  operations,
  CIGNA does not expect such changes to have a material effect on its liquidity or
  financial condition.
  
  In management's judgment, information currently available has been appropriately
  considered in estimating CIGNA's loss reserves and reinsurance recoverables.
  
  Litigation
  
  CIGNA is continuously  involved in numerous lawsuits arising, for the most part,
  in the ordinary  course of  business,  either as a liability  insurer  defending
  third-party  claims  brought  against its  insureds  or as an insurer  defending
  coverage claims brought against it by its  policyholders or other insurers.  One
  such area of litigation involves policy coverage and judicial  interpretation of
  legal liability for asbestos-related and environmental pollution (A&E) claims.
  
  While the outcome of all litigation involving CIGNA, including insurance-related
  litigation,  cannot be  determined,  litigation  (including  that related to A&E
  claims) is not expected to result in losses that differ from  recorded  reserves
  by  amounts  that would be  material  to results  of  operations,  liquidity  or
  financial  condition.   Also,   reinsurance  recoveries  related  to  claims  in
  litigation, net of the allowance for uncollectible reinsurance, are not expected
  to result in recoveries  that differ from recorded  recoverables by amounts that
  would be material to results of operations, liquidity or financial condition.
  
  Property and Casualty Restructuring
  
  Effective  December  31, 1995,  CIGNA  restructured  its  domestic  property and
  casualty businesses into two separate operations,  ongoing and run-off.  Certain
  competitors and  policyholders  of CIGNA are challenging  the  restructuring  in
  court.  Although  CIGNA expects the matter to be in litigation for some time, it
  expects to ultimately prevail.
  
                                         10
  Item 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations
  
  INTRODUCTION
  
  The following  discussion addresses the financial condition of CIGNA Corporation
  (CIGNA) as of June 30, 1998, compared with December 31, 1997, and its results of
  operations for the quarter and six months ended June 30, 1998, compared with the
  same periods  last year.  This  discussion  should be read in  conjunction  with
  Management's  Discussion and Analysis  included in CIGNA's 1997 Annual Report to
  Shareholders  (pages 10 through  23) and in CIGNA's  report on Form 10-Q for the
  first  quarter  of  1998,  to  which  the  reader  is  directed  for  additional
  information.  Due to the  seasonality  of certain  aspects of CIGNA's  business,
  caution should be used in estimating  results for the full year based on interim
  results of operations.
  
  Acquisitions and Dispositions
  
  As of January 1, 1998,  CIGNA sold its  individual  life  insurance  and annuity
  businesses for cash proceeds of $1.4 billion.  The sale resulted in an after-tax
  gain of $773 million,  of which $202 million was recognized  upon closing of the
  sale.  Since the principal  agreement to sell these businesses is in the form of
  an indemnity reinsurance arrangement, the remaining $571 million of the gain was
  deferred and is being  recognized at the rate that earnings from the  businesses
  sold would have been  expected  to emerge,  primarily  over  fifteen  years on a
  declining basis.  CIGNA recognized  approximately $16 million and $33 million of
  the deferred  gain in the second  quarter and six months of 1998,  respectively.
  The sales agreement provides for post-closing  adjustments,  however, any future
  adjustments are not expected to be material to results of operations,  liquidity
  or financial condition.
  
  CIGNA's priorities for the use of capital, including proceeds from the sale, are
  internal  growth,  acquisitions  and share  repurchases.  Absent higher internal
  growth  or  attractive  acquisition  opportunities,  proceeds  from the sale are
  expected to be used for share repurchases, depending on market conditions.
  
  CIGNA acquired the outstanding common stock of Healthsource, Inc. (Healthsource)
  on June 25, 1997. The cost of the acquisition  was $1.7 billion,  reflecting the
  purchase of  Healthsource  common stock for $1.4 billion and the  retirement  of
  Healthsource  debt of $250  million.  The  acquisition  was  accounted  for as a
  purchase,  and was  financed  through  the  issuance of  long-term  debt of $600
  million and a combination of internally generated funds and short-term debt.
  
  Goodwill  and  other   intangible   assets   associated  with  the  Healthsource
  acquisition  were $1.5  billion,  including  $24 million  recorded in the fourth
  quarter of 1997 for severance of Healthsource  employees,  vacated  Healthsource
  lease space and  adjustments  to  Healthsource  net assets to conform to CIGNA's
  accounting  policies.  Annual  expense  savings  of $35  million  after-tax  are
  expected from the severance actions and vacated lease space, with  approximately
  two-thirds  emerging  in 1998 and the full  amount in 1999.  Goodwill  and other
  intangible  assets are being  amortized  on a  straight-line  basis over periods
  ranging from eight to 40 years.
  
  In addition, in the fourth quarter of 1997, CIGNA recorded a pre-tax integration
  charge of $87 million ($58 million  after-tax) in connection  with its review of
  Healthsource  operations.  The charge  primarily  resulted  from an  analysis of
  Healthsource  HMO  medical   reserves,   receivable   balances  and  contractual
  obligations.
  
  CIGNA continues to conduct  strategic and financial reviews of its businesses in
  order to deploy its capital most effectively.  In connection with these efforts,
  CIGNA has invested in various growth  initiatives  including  approximately $210
  million for recent  international  life and health expansion,  mainly in Brazil.
  Certain risks are inherent in expanding  operations in foreign countries.  These
  investments  are  routinely   monitored  for  potential   impairment.   However,
  management currently believes that such investments are recoverable.
  
  In July 1998, CIGNA entered into an agreement,  subject to certain conditions to
  closing, to make additional investments of approximately $200 million in certain
  Brazilian  health  care  companies,  resulting  in  total  investments  in these
  companies  of  approximately  $325  million.  CIGNA  expects to make  additional
  investments in these companies.
  
                                         11
  Combined revenues of these companies during 1997 were approximately $1 billion.
  
  See  Note  3  to  the  Financial   Statements  for  additional   information  on
  acquisitions and dispositions.
  
  Cost Reduction Initiatives
  
  In the  fourth  quarter  of  1997,  CIGNA  adopted  a  cost  reduction  plan  to
  restructure  its health care  operations,  which resulted in a pre-tax charge of
  $32 million ($22 million  after-tax)  in the Employee  Life and Health  Benefits
  segment.  The charge  consisted  primarily of costs related to  severance,  real
  estate and other costs for office  closings.  The cash outlays  associated  with
  these  initiatives will continue through 1999 with most occurring in 1998. CIGNA
  has funded and will continue to fund the cash outlays through liquid assets, and
  such  funding  has not and  will  not  have a  material  adverse  effect  on its
  liquidity.  These initiatives are expected to result in annual after-tax expense
  savings of $50 million with approximately  two-thirds of the savings emerging in
  1998 and the full amount in 1999.  As of June 30,  1998,  there were no material
  changes to the costs  associated with or the anticipated  annual savings related
  to these initiatives. As of June 30, 1998, approximately $3 million of severance
  was paid to approximately 535 employees.
  
  Other Matters
  
  CIGNA is highly  dependent  on  automated  systems and systems  applications  in
  conducting  its ongoing  operations.  Such systems are utilized for, among other
  things,  processing claims,  billing and collecting  premiums from customers and
  managing  investment  activities.  If these  systems were unable to process data
  accurately  because of failing to be Year 2000 ready,  these activities would be
  interrupted  and could have a  material  adverse  effect on  CIGNA's  results of
  operations.
  
  By the beginning of 1999, CIGNA expects to substantially  complete modifications
  or replacement  of its systems to ensure Year 2000  readiness and,  during 1999,
  expects to complete  testing of its systems and verify that its systems properly
  interface   with  external   parties,   including   customers  and   third-party
  administrators.  CIGNA is utilizing both internal and external resources to meet
  this  timetable.  The  after-tax  costs  of these  efforts  are  expected  to be
  approximately $100 million in 1998 and $50 million in 1999. Approximately 60% of
  total Year 2000 costs are attributable to existing systems  resources which have
  been  redirected  to the Year 2000  efforts.  The  remaining  amounts  represent
  incremental  costs for Year 2000 efforts.  Due to the complexities of estimating
  remediation  costs,  estimates  are  subject  to  change  as Year  2000  efforts
  progress. Year 2000 costs for the second quarter and six months of 1998 were $28
  million and $42 million after-tax, respectively.
  
  As noted above, CIGNA has relationships with various third-party entities in its
  ordinary  course of business.  CIGNA is assessing and attempting to mitigate its
  risks with respect to the failure of these  entities to be Year 2000 ready.  The
  effect,  if any,  on CIGNA's  results of  operations  from the  failure of these
  entities  to be Year  2000  ready  is not  reasonably  estimable.  Property  and
  casualty indemnity losses for Year 2000 claims and litigation costs to defend or
  deny such claims are not reasonably estimable at this time.
  
  Certain European  countries plan to begin  implementing a common currency (euro)
  in January 1999. CIGNA expects that it will have procedures and systems in place
  as of January 1999 to support the  implementation of the euro and that the costs
  of  these  efforts  as well  as the  overall  effect  on  CIGNA's  international
  operations will not be material.
  
  CIGNA's  businesses  are  subject  to  a  changing  social,   economic,   legal,
  legislative  and  regulatory  environment  that could affect  them.  Some of the
  changes include initiatives to: 
  o   increase health care regulation; 
  o   revise the system of funding cleanup of
      environmental damages;
  o   reinterpret insurance contracts long after the
      policies were written to provide coverage
      unanticipated by CIGNA;
  o   restrict insurance pricing and the application of
      underwriting standards; and
  o   revise federal tax laws.
  
  The eventual  effect on CIGNA of the changing  environment  in which it operates
  remains  uncertain.  For  additional  information,  see Note 9 to the  Financial
  Statements.
  
                                         12
  Recent Accounting Pronouncements
  
  In 1998, the Financial  Accounting  Standards  Board (FASB) issued  Statement of
  Financial  Accounting  Standards  (SFAS) No.  133,  "Accounting  for  Derivative
  Instruments and Hedging  Activities."  SFAS No. 133 requires that derivatives be
  reported  on the  balance  sheet  at  fair  value.  Changes  in fair  value  are
  recognized  in net income or, for  derivatives  which are  hedging  market  risk
  related to future cash flows,  in the  accumulated  other  comprehensive  income
  section of shareholders' equity. Implementation is required by the first quarter
  of 2000,  with the  cumulative  effect of adoption  reflected  in net income and
  accumulated other comprehensive income, as appropriate. CIGNA has not determined
  the effect or timing of implementation of this pronouncement.
  
  The American Institute of Certified Public Accountants  (AICPA) issued Statement
  of Position  (SOP) 97-3,  "Accounting  by Insurance  and Other  Enterprises  for
  Insurance-Related  Assessments"  in 1997.  SOP  97-3  provides  guidance  on the
  recognition   and  measurement  of  liabilities  for  guaranty  fund  and  other
  insurance-related  assessments.  Implementation is required by the first quarter
  of 1999, with the cumulative  effect of adopting the SOP reflected in net income
  in the year of  adoption.  CIGNA  has not  determined  the  effect  or timing of
  implementation of this pronouncement.
  
  In 1998,  the AICPA  issued  SOP  98-1,  "Accounting  for the Costs of  Computer
  Software  Developed or Obtained for Internal  Use." SOP 98-1 specifies the types
  of costs that must be capitalized  and amortized  over the  software's  expected
  useful  life and the types of costs  which  must be  immediately  recognized  as
  expense. Implementation is required by the first quarter of 1999. Although CIGNA
  has not yet determined the timing of  implementation,  this pronouncement is not
  expected  to have a  material  effect on  results of  operations,  liquidity  or
  financial condition.
  
  CONSOLIDATED RESULTS OF OPERATIONS
  =================================================================
  FINANCIAL SUMMARY           Three Months Ended   Six Months Ended
                                   June 30,            June 30,
  (In millions)                 1998       1997      1998      1997
  -----------------------------------------------------------------
  Premiums and fees           $4,115     $3,482    $8,016    $6,870
  Net investment income          942      1,062     1,879     2,115
  Other revenues                 217        163       731       323
  Realized investment gains       47         12       106        56
                           ----------------------------------------
  Total revenues               5,321      4,719    10,732     9,364
  Benefits and expenses        4,850      4,308     9,493     8,516
                           ----------------------------------------
  Income before taxes            471        411     1,239       848
  Income taxes                   163        132       436       281
                           ----------------------------------------
  Net income                    $308       $279      $803      $567
  -------------------------========================================
  Realized investment gains,
  net of taxes                   $32         $9       $70       $37
  -------------------------========================================
  
  CIGNA's consolidated net income increased 10% for the second quarter and 42% for
  the six months of 1998 from the same periods last year. These increases  reflect
  higher  operating  income* in the Employee Life and Health Benefits and Employee
  Retirement and Savings Benefits segments,  improved realized  investment results
  and, for the six months of 1998, the $202 million after-tax gain recognized upon
  closing of the sale of CIGNA's individual life insurance and annuity businesses.
  
  After-tax  realized  investment  results  increased  significantly in the second
  quarter and six months of 1998 from the same periods last year.  These increases
  primarily reflect gains on sales of fixed maturities,  real estate  partnerships
  and, for the six months,  mortgage loans. For additional  information see Note 4
  to the Financial Statements.
  
  Full year  operating  income  for 1998 is  expected  to be  comparable  to 1997,
  excluding  the $202 million gain on sale of businesses  discussed  above and the
  1997  Healthsource  integration  and health  care cost  reduction  charge of $80
  million.  Results for 1998 could be adversely  affected by the factors  noted in
  the cautionary statements on page 22.
  
  --------
  *Operating  income  (loss) is defined as net income (loss)  excluding  after-tax
  realized investment results.
  
                                         13
  EMPLOYEE LIFE AND HEALTH BENEFITS
  =================================================================
  FINANCIAL SUMMARY          Three Months Ended    Six Months Ended
                                   June 30,             June 30,
  (In millions)                 1998       1997      1998      1997
  -----------------------------------------------------------------
  Premiums and fees           $2,827     $2,117    $5,557    $4,220
  Net investment income          141        138       284       273
  Other revenues                 137        117       266       224
  Realized investment gains       29          1        56         7
                           ----------------------------------------
  Total revenues               3,134      2,373     6,163     4,724
  Benefits and expenses        2,881      2,186     5,675     4,352
                           ----------------------------------------
  Income before taxes            253        187       488       372
  Income taxes                    93         59       179       123
                           ----------------------------------------
  Net income                    $160       $128      $309      $249
  -------------------------========================================
  Realized investment gains,
  net of taxes                   $18         $2       $36        $6
  -------------------------========================================
  
  Net income for the Employee Life and Health Benefits  segment  increased 25% and
  24% for the  second  quarter  and six  months  of 1998,  compared  with the same
  periods  last year.  Operating  income for the second  quarter and six months of
  1998  increased 13% and 12%,  respectively,  compared with the same periods last
  year. Operating income for the Indemnity and HMO operations was as follows:
  
  ==================================================================
                              Three Months Ended    Six Months Ended
                                   June 30,             June 30,
  (In millions)                 1998       1997      1998      1997
  ------------------------------------------------------------------
  Indemnity operations           $72        $68      $141      $126
  HMO operations                  70         58       132       117
  ------------------------------------------------------------------
  Total                         $142       $126      $273      $243
  ==================================================================
  
  Indemnity  operating  income increased 6% and 12% for the second quarter and six
  months of 1998,  respectively,  compared with the same periods last year.  These
  increases primarily reflect improved claim experience.
  
  HMO  results  for  the  second  quarter  and six  months  of  1998  include  net
  unfavorable  after-tax  adjustments  of $6 million  primarily for  uncollectible
  receivables  for a health  care  service  business.  HMO  results for the second
  quarter and six months of 1997 include net favorable after-tax adjustments of $9
  million and $11 million,  respectively.  Excluding the adjustments, HMO earnings
  were $76 million and $138 million for the second quarter and six months of 1998,
  respectively,  compared  with $49 million and $106  million for the same periods
  last year. These  improvements  reflect medical membership growth primarily from
  the Healthsource acquisition and rate increases,  improved results in dental and
  mental health operations and lower operating  expenses per member due to expense
  savings  initiatives.  These improvements were partially offset by increased HMO
  medical costs reflecting  higher pharmacy and outpatient costs, and Healthsource
  goodwill and other  intangibles  amortization  of $9 million and $18 million for
  the second quarter and six months of 1998, respectively.
  
  Premiums and fees increased 34% and 32% for the second quarter and six months of
  1998,  respectively,  compared to the same  periods last year.  These  increases
  primarily reflect  Healthsource  premiums and fees of approximately $525 million
  and $1.0 billion,  respectively,  rate increases and non-Healthsource membership
  growth.  Growth in  premiums  is  expected  to  continue  to be  constrained  by
  competitive pressures in both the medical indemnity and HMO markets.
  
  Net investment  income increased 2% and 4% for the second quarter and six months
  of 1998, respectively, compared to the same periods in 1997 primarily due to the
  addition of assets related to Healthsource, partially offset by lower yields.
  
  As of June 30,  1998,  total  HMO  membership  was  approximately  6.4  million,
  representing  an increase of 41% since June 30, 1997 and 9% since  December  31,
  1997.  Approximately  65% of the increase  from June 30, 1997 is a result of the
  Healthsource  acquisition while the remaining 35% reflects  membership growth in
  CIGNA's HMO alternative  funding  programs and  traditional HMO business.  Under
  alternative  funding  programs,  the  customer  assumes  all or a portion of the
  responsibility for funding claims. CIGNA generally earns a lower margin on these
  programs than under traditional HMO plans.
  
  Management  believes  that  adding  premium  equivalents  to  premiums  and fees
  (adjusted  premiums  and fees)  produces a more  meaningful  measure of business
  volume.  Premium  equivalents for the second quarter and six months of 1998 were
  approximately  $3.2  billion  and  $6.4  billion,  respectively.  These  amounts
  represent  an increase of 34% compared  with the same  periods  last year.  This
  increase  primarily  reflects  the  Healthsource  acquisition,  and to a  lesser
  extent, higher medical
  
                                         14
  costs.  Premium  equivalents  are  expected  to continue  to be  constrained  by
  competitive  pressures in both the medical  indemnity  and HMO markets.  Premium
  equivalents  were 54% and 53% of total  adjusted  premiums  and fees for the six
  months of 1998 and 1997, respectively.  Administrative Services Only (ASO) plans
  accounted for 49% of total adjusted premiums and fees for the six months of 1998
  and 1997.
  
  EMPLOYEE RETIREMENT AND SAVINGS BENEFITS
  =================================================================
  FINANCIAL SUMMARY         Three Months Ended    Six Months Ended
                                 June 30,             June 30,
  (In millions)                 1998       1997     1998       1997
  -----------------------------------------------------------------
  Premiums and fees              $59        $52     $113        $98
  Net investment income          388        397      775        799
  Realized investment gains       12          2       16         14
                           ----------------------------------------
  Total revenues                 459        451      904        911
  Benefits and expenses          364        372      723        740
                           ----------------------------------------
  Income before taxes             95         79      181        171
  Income taxes                    31         25       58         55
                           ----------------------------------------
  Net income                     $64        $54     $123       $116
  -------------------------========================================
  Realized investment gains,
  net of taxes                    $8         $1      $11         $9
  -------------------------========================================
  
  Net income for the Employee  Retirement and Savings Benefits  segment  increased
  19% and 6% for the second quarter and six months of 1998, compared with the same
  periods of 1997.  Operating income for the second quarter and six months of 1998
  was $56 million and $112 million, compared with $53 million and $107 million for
  the same periods last year.  These  increases  reflect  higher  earnings from an
  increased  asset base,  partially  offset by  customers'  shift to lower  margin
  products (separate account equity funds).
  
  Premiums and fees increased 13% and 15% for the second quarter and six months of
  1998, respectively,  compared with the same periods last year, reflecting higher
  annuity sales and higher fees from separate accounts.
  
  Net investment  income decreased 2% and 3% for the second quarter and six months
  of 1998, respectively. These decreases primarily reflect lower investment yields
  and customers' continued  redirection of a portion of their investments from the
  general account to separate accounts.
  
  Assets  under  management  is generally a key  determinant  of earnings for this
  segment.  For the six months ended June 30, assets under  management and related
  activity, including amounts attributable to separate accounts, were as follows:
  
  ==================================================================
  (In millions)                                  1998           1997
  ------------------------------------------------------------------
  Balance -- January 1                        $46,074        $40,605
  Premiums and deposits                         3,851          3,607
  Investment results                            1,475          1,201
  Increase in fair value of assets              1,983          1,711
  Customer withdrawals                         (2,258)        (1,220)
  Other, including participant
  withdrawals and benefit payments             (2,852)        (1,993)
  ------------------------------------------------------------------
  Balance -- June 30                          $48,273        $43,911
  ==================================================================
  
  Premiums and deposits increased 7% in the six months of 1998,  compared with the
  same  period  in 1997,  primarily  reflecting  higher  recurring  deposits  from
  existing customers.  For the six months of 1998 and 1997,  approximately 53% and
  48%,  respectively,  of premiums and deposits  reflect  recurring  deposits from
  existing  customers while the remaining amounts represent sales to new customers
  and new plan sales to existing  customers.  Investment  results increased 23% in
  the six months of 1998,  compared  with the same period in 1997.  This  increase
  reflects  higher capital gains and growth in assets,  partially  offset by lower
  investment  yields.  The increase for 1998 in the fair value of assets is due to
  market value  appreciation of equity  securities in separate  accounts and, to a
  lesser  extent,  market value  appreciation  of fixed  maturities in the general
  account.  The increase in customer withdrawals is primarily due to the effect of
  one customer  withdrawal  in the second  quarter of 1998.  The increase in Other
  reflects larger  participant  withdrawals  and benefit  payments due to a higher
  level of assets under management.
  
  Management expects asset growth to continue to be constrained due to the lack of
  growth in the defined benefit market. In addition,  assets under management will
  continue to be affected by market value  fluctuations  for fixed  maturities and
  equity securities.
  
                                         15
  INDIVIDUAL FINANCIAL SERVICES
  =================================================================
  FINANCIAL SUMMARY          Three Months Ended    Six Months Ended
                                   June 30,             June 30,
  (In millions)                 1998       1997      1998      1997
  -----------------------------------------------------------------
  Premiums and fees             $159       $249      $314      $483
  Net investment income          166        271       336       531
  Other revenues                  25         15       367        29
  Realized investment gains                  
  (losses)                        (1)        (2)        7        11
                           ----------------------------------------
  Total revenues                 349        533     1,024     1,054
  Benefits and expenses          296        461       584       897
                           ----------------------------------------
  Income before taxes             53         72       440       157
  Income taxes                    16         25       155        55
                           ----------------------------------------
  Net income                     $37        $47      $285      $102
  -------------------------========================================
  Realized investment gains
  (losses), net of taxes         $--        ($1)       $5        $7
  -------------------------========================================
  
  Net income for the  Individual  Financial  Services  segment  decreased  for the
  second quarter of 1998 and increased  substantially  for the six months of 1998,
  compared  with the same  periods  of 1997.  Results  for the six  months of 1998
  include an  after-tax  gain of $202 million  recognized  upon the closing of the
  sale of the individual life insurance and annuity businesses and results for the
  second  quarter and six months  include  $16 million and $33 million  after-tax,
  respectively, from recognition of a portion of the deferred gain associated with
  the sale (as discussed on page 11).  Excluding these amounts,  operating  income
  for the second  quarter and six months of 1998 was $21 million and $45  million,
  respectively.  These amounts,  compared with operating income of $25 million and
  $51 million for the same periods in 1997 (excluding  results from the businesses
  sold),  primarily  reflect  unfavorable  claim  experience  in  the  reinsurance
  operation,  partially offset by growth in interest-sensitive  and specialty life
  reinsurance products.
  
  For the second  quarter and six months of 1998,  premiums and fees decreased 36%
  and 35%,  respectively,  compared with the same periods of 1997.  Excluding 1997
  premiums and fees related to the  businesses  sold,  the increase for the second
  quarter and six months of 1998 was 11% and 14%,  respectively.  These  increases
  reflect growth in reinsurance and higher renewal premiums for interest-sensitive
  products.
  
  Net  investment  income  decreased  39% and 37% for the second  quarter  and six
  months of 1998, respectively,  compared with the same periods of 1997. Excluding
  1997 net investment  income related to the businesses sold, the increase for the
  second  quarter  and six  months  of 1998  was 9% and 11%,  respectively.  These
  increases primarily reflect growth in interest-sensitive products.
  
  In 1996,  Congress passed  legislation that phases out over a three-year  period
  the tax deductibility of policy loan interest for most leveraged corporate-owned
  life insurance (COLI)  products.  For the second quarter and six months of 1998,
  revenues of $139  million and $284 million and  operating  income of $11 million
  and $21  million,  respectively,  were from  leveraged  COLI  products  that are
  affected  by this  legislation.  The effect of this  legislation  on  customers'
  decisions to maintain  these  policies  after the  phase-out  period is unknown.
  However, all or a portion of these policies could lapse.
  
  PROPERTY AND CASUALTY
  =================================================================
  FINANCIAL SUMMARY            Three Months Ended  Six Months Ended
                                   June 30,            June 30,
  (In millions)                   1998      1997     1998     1997
  -----------------------------------------------------------------
  Premiums and fees             $1,070    $1,064   $2,032   $2,069
  Net investment income            180       189      353      384
  Other revenues                    67        65      136      137
  Realized investment gains          3        11       22       24
                          -----------------------------------------
  Total revenues                 1,320     1,329    2,543    2,614
  Benefits and expenses          1,237     1,238    2,368    2,428
                          -----------------------------------------
  Income before taxes               83        91      175      186
  Income taxes                      27        25       57       55
                          -----------------------------------------
  Net income                       $56       $66     $118     $131
  ------------------------=========================================
  Realized investment
  gains, net of taxes               $1        $7      $13      $15
  ------------------------=========================================
  
  Net income for the Property and Casualty  segment  decreased 15% and 10% for the
  second  quarter  and six months of 1998,  respectively,  compared  with the same
  periods last year.
  
                                         16
  Operating  income  decreased 7% and 9% for the second  quarter and six months of
  1998, respectively, compared with the same periods in 1997. Operating income for
  the ongoing and run-off operations was as follows:
  
  =================================================================
                             Three Months Ended    Six Months Ended
                                   June 30,             June 30,
  (In millions)                 1998      1997       1998      1997
  -----------------------------------------------------------------
  Ongoing operations:
    International                $28       $36        $59       $69
    Domestic                      27        23         46        46
                          -----------------------------------------
      Total ongoing
        operations                55        59        105       115
  Run-off operations              --        --         --         1
  -----------------------------------------------------------------
      Total                      $55       $59       $105      $116
  =================================================================
  
  The  decline in the  international  operations  for the second  quarter  and six
  months of 1998 primarily  reflects  lower property and casualty  earnings due to
  unfavorable  claim  experience and the  competitive  environment,  and lower net
  investment  income.  Partially  offsetting the decline were  improvements in the
  international life and health operations (primarily in Japan) and the absence of
  a  $6  million  after-tax  charge  for  cost  reduction  initiatives,  primarily
  severance, recorded in the second quarter of 1997.
  
  The increase in the domestic  operations in the second  quarter of 1998 reflects
  improved  claim  experience  in the  commercial  package and  property  lines of
  business   partially   offset  by  unfavorable   claim  experience  in  workers'
  compensation  and lower net  investment  income.  For the six months,  operating
  income  was  level  with  the  prior  year  reflecting  overall  improved  claim
  experience, offset by lower net investment income.
  
  Results for the run-off  operations  primarily reflect prior year development on
  claim and claim adjustment expense reserves and investment activity.
  
  Premiums and fees  increased  1% for the second  quarter and declined 2% for the
  six months of 1998.  These modest changes reflect  continued  price  competition
  and, for international, the unfavorable effect of foreign exchange.
  
  Net investment  income decreased 5% and 8% for the second quarter and six months
  of 1998,  respectively,  compared  with the same  periods of 1997.  The declines
  reflect lower average assets,  the unfavorable  effect of foreign exchange and a
  shift  in  the  investment   portfolio  mix  from  fixed  maturities  to  equity
  securities.
  
  The ongoing  operations  had pre-tax  catastrophe  losses of $10 million and $30
  million for the second  quarter and six months of 1998,  respectively,  compared
  with $2 million  and $14 million  for the same  periods of 1997.  The effects of
  reinsurance on catastrophe losses for the periods presented were not material.
  
  Effective July 1, 1998, CIGNA revised its reinsurance programs. CIGNA's domestic
  reinsurance  programs  provide  for  approximately  60%  recovery  for  property
  catastrophe  losses  between  $45 million and $260  million.  Other  reinsurance
  programs  are  in  place  which  could  provide  for  the  recovery  of up to an
  additional  $300 million on certain  losses,  including  property  catastrophes,
  depending  on  the   aggregate   annual  level  of  losses   incurred.   CIGNA's
  international  catastrophe program provides approximately 95% recovery of losses
  between $100 million and $400  million.  CIGNA's  future  results of  operations
  could  be  volatile,   depending  on  the   frequency  and  severity  of  future
  catastrophes.
  
  Certain  competitors  and  policyholders  of CIGNA are  challenging in court the
  restructuring of its domestic  property and casualty  business into two separate
  operations,  ongoing and  run-off.  Although  CIGNA  expects the matter to be in
  litigation for some time, it expects to ultimately prevail.
  
                                         17
  LOSS RESERVES AND REINSURANCE RECOVERABLES
  
  CIGNA's reserving methodology and significant issues affecting the estimation of
  loss reserves and reinsurance recoverables are described in its 1997 Form 10-K.
  
  CIGNA's  property and casualty  loss reserves of $15.0 billion and $15.1 billion
  as of June 30, 1998 and  December  31,  1997,  respectively,  are an estimate of
  future  payments  for  reported  and  unreported  claims for losses and  related
  expenses with respect to insured events that have occurred. The basic assumption
  underlying  the  many  traditional  actuarial  and  other  methods  used  in the
  estimation of property and casualty loss reserves is that past  experience is an
  appropriate  basis for  predicting  future events.  However,  current trends and
  other factors that would modify past experience are also considered. The process
  of  establishing  loss  reserves  is subject to  uncertainties  that are normal,
  recurring and inherent in the property and casualty business.
  
  CIGNA  continually  attempts to improve its loss estimation  process by refining
  its  analysis  of  loss   development   patterns,   claims  payments  and  other
  information,  but there remain many reasons for adverse development of estimated
  ultimate   liabilities.   For   example,   unanticipated   changes  in  workers'
  compensation and product liability laws have at times significantly affected the
  ability of  insurers  to  estimate  liabilities  for unpaid  losses and  related
  expenses.
  
  Reserving  for  property  and  casualty  claims  continues  to be a complex  and
  uncertain  process,  requiring  the use of  informed  estimates  and  judgments.
  CIGNA's  estimates and judgments  may be revised as  additional  experience  and
  other data become available and are reviewed,  as new or improved  methodologies
  are  developed or as current law  changes.  Any such  revisions  could result in
  future changes in estimates of losses or reinsurance recoverables,  and would be
  reflected in CIGNA's results of operations for the period in which the estimates
  are  changed.  While the effect of any such  changes in  estimates  of losses or
  reinsurance  recoverables  could be  material to future  results of  operations,
  CIGNA does not expect such changes to have a material effect on its liquidity or
  financial condition.
  
  CIGNA  manages  its  loss  exposure  through  the  use  of  reinsurance.   While
  reinsurance  arrangements  are designed to limit losses from large exposures and
  to permit recovery of a portion of direct losses,  reinsurance  does not relieve
  CIGNA of liability to its insureds. Accordingly, CIGNA's loss reserves represent
  total  gross  losses,  and  reinsurance   recoverables   represent   anticipated
  recoveries of a portion of those losses.
  
  CIGNA's  reinsurance  recoverables  were  approximately  $5.9  billion  and $6.2
  billion  as of June 30,  1998 and  December  31,  1997,  net of  allowances  for
  unrecoverable reinsurance of $707 million and $720 million, respectively.
  
  In management's judgment, information currently available has been appropriately
  considered in estimating CIGNA's loss reserves and reinsurance recoverables.
  
  The  following  table  shows the  adverse  (favorable)  pre-tax  effects  on the
  Property  and  Casualty   segment's   results  of  operations  from  prior  year
  development, net of reinsurance, for the quarter and six months ended June 30:
  
  =================================================================
                              Three Months Ended   Six Months Ended
                                   June 30,             June 30,
  (In millions)                 1998       1997      1998      1997
  -----------------------------------------------------------------
  By business operation:
    Ongoing operations            $3        $(7)       $5       $14
    Run-off operations            47         47        93       100
  -----------------------------------------------------------------
  Total                          $50        $40       $98      $114
  =================================================================
  By type of loss:
    Asbestos-related             $19        $27       $37       $48
    Environmental pollution        8          8        15        14
    Unrecoverable
       reinsurance                 5          3        14         9
    Workers' compensation         14          6        24        18
    Other                          4         (4)        8        25
  -----------------------------------------------------------------
  Total                          $50        $40       $98      $114
  =================================================================
  
  OTHER OPERATIONS
  
  Other Operations  primarily includes  unallocated  investment  income,  expenses
  (including  debt  service) and taxes.  Also  included are the results of CIGNA's
  settlement  annuity business and non-insurance  operations  engaged primarily in
  investment and real estate activities and certain new business initiatives.
  
                                         18
  Excluding realized investment results,  Other Operations had operating losses of
  $14  million  and $37  million  for the second  quarter  and six months of 1998,
  respectively,  compared  with losses of $16 million and $31 million for the same
  periods  in 1997.  The  improvement  for the second  quarter  of 1998  primarily
  reflects lower operating expenses while the increase in operating losses for the
  six months primarily  reflects  financing costs associated with the Healthsource
  acquisition and increased expenses related to new business initiatives.
  
  LIQUIDITY AND CAPITAL RESOURCES
  
  Liquidity  for CIGNA  and its  insurance  subsidiaries  has  remained  strong as
  evidenced by  significant  amounts of short-term  investments  and cash and cash
  equivalents   in  the  aggregate.   Generally,   CIGNA  has  met  its  operating
  requirements  by maintaining  appropriate  levels of liquidity in its investment
  portfolio and through utilization of overall positive cash flows.
  
  For the six months of 1998,  cash and cash  equivalents  decreased  $722 million
  from $2.6 billion as of December  31, 1997.  This  decrease  primarily  reflects
  payments of dividends on and  repurchases of CIGNA common stock ($488  million),
  repayment of debt ($461 million),  net withdrawals from  contractholder  deposit
  funds ($375  million),  and cash used in operating  activities  ($103  million),
  reflecting  the timing of  operating  cash  receipts  and  disbursements.  These
  decreases were partially  offset by cash provided by investing  activities ($696
  million),  which  includes  net  proceeds  on the  sale of the  individual  life
  insurance and annuity businesses of approximately $1.3 billion, partially offset
  by net investment purchases.
  
  CIGNA's  capital  resources  represent  funds  available for long-term  business
  commitments.  They primarily  consist of retained earnings and proceeds from the
  issuance of long-term debt and equity  securities.  CIGNA's  financial  strength
  provides the capacity and flexibility to enable it to raise funds in the capital
  markets  through the  issuance of such  securities.  CIGNA  continues to be well
  capitalized, with sufficient borrowing capacity to meet the anticipated needs of
  its businesses.
  
  CIGNA had $1.4 billion and $1.5 billion of long-term  debt  outstanding  at June
  30,  1998 and  December  31,  1997.  As of June 30,  1998,  CIGNA had $1 billion
  remaining  under  effective  shelf   registration   statements  filed  with  the
  Securities and Exchange Commission that may be issued as debt securities, equity
  securities  or both,  depending  upon  market  conditions  and  CIGNA's  capital
  requirements.
  
  In July 1998,  CIGNA completed an offer to exchange its 8.3% Step Down Notes due
  2033 (New Notes) for 8.3% Notes due 2023 (Old Notes).  Old Notes with  principal
  amounts  aggregating  approximately $83 million were tendered in connection with
  the exchange offer. The New Notes bear interest at 8.3% through January 14, 2023
  and 8.08% to January 15, 2033. The New Notes may be redeemed at CIGNA's  option,
  at any time,  at par plus a possible  additional  redemption  payment.  Expenses
  incurred in connection with the exchange were not material.
  
  At June 30, 1998,  CIGNA's  short-term debt amounted to $254 million, a decrease
  of $436 million from December 31, 1997.
  
  In April 1998,  CIGNA's Board of Directors  increased  CIGNA's  authorization to
  repurchase its common stock by $750 million.  Stock  repurchases  will depend on
  prevailing  market  conditions and alternative  uses of capital.  From January 1
  through July 30, 1998, CIGNA has repurchased  approximately 6,343,500 shares for
  $432 million,  including 835,000 shares repurchased for $61 million during July.
  The remaining authorization as of July 30, 1998 was $679 million.
  
                                         19
  INVESTMENT ASSETS
  ==================================================================
                                        June 30,        December 31,
  (In millions)                             1998                1997
  ------------------------------------------------------------------
  Fixed maturities                       $32,920             $36,358
  Equity securities                        1,089                 854
  Mortgage loans                           9,503              10,859
  Real estate                                766                 769
  Other, primarily policy loans            7,129               7,738
  ------------------------------------------------------------------
  Total investment assets                $51,407             $56,578
  ==================================================================
  
  Additional information regarding CIGNA's investment assets is included in Note 4
  to the second quarter 1998 Financial Statements and Notes 2, 4 and 5 to the 1997
  Financial Statements as well as the 1997 Form 10-K.
  
  Investment  assets as of June 30, 1998 decreased 9% from December 31, 1997. This
  decrease primarily relates to investments which were included in the sale of the
  individual life insurance and annuity businesses.
  
  Significant   amounts  of  CIGNA's   investment   assets  are   attributable  to
  experience-rated   contracts  with   policyholders   (policyholder   contracts).
  Approximate  percentages of investments  attributable to policyholder  contracts
  were as follows:
  
  ==================================================================
                                           June 30,     December 31,
                                               1998             1997
  ------------------------------------------------------------------
  Fixed maturities                              31%              29%
  Mortgage loans                                58%              53%
  Real estate                                   63%              64%
  ==================================================================
  
  Fixed Maturities
  
  Investments in fixed  maturities  (bonds)  include  publicly  traded and private
  placement debt securities;  asset-backed  securities,  including  collateralized
  mortgage obligations (CMOs); and redeemable preferred stocks.
  
  As of June 30, 1998, the fair value of fixed maturities,  including policyholder
  share,  was greater than  amortized  cost by $2.0  billion,  compared  with $2.1
  billion as of  December  31,  1997.  The  decrease  in  unrealized  appreciation
  primarily  relates to bonds which were  included  in the sale of the  individual
  life insurance and annuity businesses.
  
       Potential Problem and Problem Bonds
  
  Potential  problem  bonds are fully  current  but judged by  management  to have
  certain  characteristics that increase the likelihood of problem classification.
  CIGNA had $44 million of potential problem bonds, including amounts attributable
  to policyholder  contracts, as of June 30, 1998, compared with $63 million as of
  December  31,  1997.  These  amounts  are net of $2 million  and $10  million of
  cumulative write-downs, respectively.
  
  CIGNA considers bonds that are delinquent or restructured as to terms, typically
  interest rate and, in certain cases,  maturity date,  problem bonds.  As of June
  30, 1998 and December  31,  1997,  CIGNA had problem  bonds,  including  amounts
  attributable to policyholder contracts, of $131 million and $137 million, net of
  related cumulative write-downs of $22 million and $30 million, respectively.
  
  CIGNA recognizes interest income on problem bonds only when payment is received.
  See the Summary on page 22 for the effect of  non-accruals  and  write-downs for
  bonds on policyholder contracts and on CIGNA's net income.
  
                                         20
  Mortgage Loans
  ==================================================================
                                         June 30,       December 31,
                                             1998               1997
  ------------------------------------------------------------------
  Mortgage loans (in millions)             $9,503            $10,859
  Property type:
     Retail facilities                        38%                40%
     Office buildings                          35                 34
     Apartment buildings                       15                 13
     Industrial                                 6                  5
     Hotels                                     4                  5
     Other                                      2                  3
  Total                                      100%               100%
  ==================================================================
  
  CIGNA's  investment  strategy  requires  diversification  of the  mortgage  loan
  portfolio. This strategy includes guidelines relative to property type, location
  and borrower to reduce its exposure to potential losses.
  
       Potential Problem and Problem Mortgage Loans
  
  Potential problem mortgage loans include:
  o   fully current loans that are judged by
      management to have certain characteristics that
      increase the likelihood of problem classification;
  o   fully current loans for which the borrower has
      requested restructuring; and
  o   loans  that  are 30 to 59  days  delinquent  with
      respect  to  interest  or principal payments.
  
  CIGNA had potential problem mortgage loans,  including  amounts  attributable to
  policyholder contracts, of $140 million as of June 30, 1998, and $191 million as
  of December 31, 1997,  net of related  valuation  reserves of $5 million and $41
  million, respectively.
  
  CIGNA's  problem  mortgage loans include  delinquent and  restructured  mortgage
  loans.  Delinquent  mortgage  loans  include  those on which  payment is overdue
  generally  60 days or more.  Restructured  mortgage  loans are those whose basic
  financial  terms have been  modified,  typically to reduce the interest  rate or
  extend the maturity date.
  
  CIGNA had problem mortgage loans, including amounts attributable to policyholder
  contracts,  of $133 million and $152  million,  net of valuation  reserves of $9
  million as of June 30, 1998 and December 31, 1997.
  
  CIGNA recognizes  interest income on problem mortgage loans only when payment is
  received.  See  the  Summary  on  page 22 for the  effect  of  non-accruals  and
  valuation  reserves for mortgage loans on policyholder  contracts and on CIGNA's
  net income.
  
  Real Estate
  
  As of June 30, 1998 and  December  31,  1997,  investment  real  estate,  net of
  reserves  and  write-downs,   included:   1)  $393  million  and  $414  million,
  respectively,  of real estate  held for the  production  of income,  and 2) $373
  million and $355 million,  respectively, of real estate held for sale, primarily
  properties acquired as a result of foreclosure of mortgage loans.
  
  See the Summary on page 22 for the effect of write-downs and valuation  reserves
  for real estate on policyholder contracts and on CIGNA's net income.
  
                                         21
  Summary
  
  The adverse (favorable) effects of write-downs and changes in valuation reserves
  as well as of non-accruals  on policyholder  contracts and on CIGNA's net income
  were as follows:
  ----------------------------------------------------------------------------------------------------------------------
  Three Months Ended June 30,                             Six Months Ended June 30,
                          ---------------------------------------          --------------------------------------------
                               1998                      1997                      1998                       1997
                          ----------------          -------------          ----------------               -------------
                      Policy-                   Policy-                    Policy-                   Policy-
                       holder                    holder                     holder                    holder
  (In millions)     Contracts       CIGNA     Contracts        CIGNA     Contracts       CIGNA     Contracts       CIGNA
  ----------------------------------------------------------------------------------------------------------------------
  Write-downs and
  valuation
  reserves:
     Bonds                $--          $1            $1           $7            $1          $1            $7          $8
     Mortgage loans        --          --             4            4            (3)         (1)            6           5
     Real estate            1          --            --            1            (1)         --             1           2
  ----------------------------------------------------------------------------------------------------------------------
  Total                    $1          $1            $5          $12           $(3)        $--           $14         $15
  ======================================================================================================================
  Non-accruals:
     Bonds                 $1          $1            $1          $--            $2          $3            $3          $5
     Mortgage loans        (1)         --            --           --            (1)         --            (1)         --
  ----------------------------------------------------------------------------------------------------------------------
  Total                   $--          $1            $1          $--            $1          $3            $2          $5
  ======================================================================================================================
  Additional  losses from problem  investments  are expected to occur for specific
  investments   in  the  normal  course  of  business.   Assuming  no  significant
  deterioration   in   economic   conditions,    including   further   significant
  deterioration in Asian economies, CIGNA does not expect additional non-accruals,
  write-downs  and reserves to  materially  affect future  results of  operations,
  liquidity or financial  condition,  or to result in a significant decline in the
  aggregate carrying value of its assets.
  
  CAUTIONARY  STATEMENTS  FOR  PURPOSES  OF THE "SAFE  HARBOR"  PROVISIONS  OF THE
  PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
  
  Except for historical  information provided in this Management's  Discussion and
  Analysis of  Financial  Condition  and Results of  Operations,  statements  made
  throughout  this  document are  forward-looking  and contain  information  about
  financial results,  economic conditions,  trends and known uncertainties.  CIGNA
  cautions  the reader that actual  results  could  differ  materially  from those
  expected by CIGNA,  depending on the outcome of certain  factors  (some of which
  are  described  with  the  forward-looking  statements)  including:  1)  adverse
  catastrophe  experience in CIGNA's property and casualty businesses;  2) adverse
  property and casualty  loss  development  for events that CIGNA insured in prior
  years;  3) an  increase  in medical  costs in CIGNA's  health  care  operations,
  including increases in utilization and costs of medical services;  4) heightened
  competition,  particularly  price  competition,  reducing  product  margins  and
  constraining  growth in CIGNA's  businesses;  5) significant changes in interest
  rates;  and 6) the effect on CIGNA's  international  operations and  investments
  from further significant deterioration in Asian economies.
  
                                         22
  Part II.  OTHER INFORMATION
  
  Item 4.           Submission of Matters to a Vote of Security Holders.
                    ----------------------------------------------------
  
                    The Annual Meeting of  Shareholders  of CIGNA  Corporation was
                    held on April 22, 1998. At the meeting,  63,531,309  shares of
                    Common  Stock  were  represented  and  entitled  to vote,  and
                    72,129,426   shares  of  Common  Stock  were  outstanding  and
                    entitled to vote. CIGNA  shareholders  elected nominees to the
                    Board  of  Directors,   ratified  the   appointment  of  Price
                    Waterhouse  LLP (now known as  PricewaterhouseCoopers  LLP) as
                    independent accountants for 1998, and approved an amendment to
                    the Certificate of Incorporation.
  Votes
                                                                Votes For                 Withheld
                                                                ---------                 --------
  
                    Election of nominee to 
                    Board of Directors for
                    term expiring in April, 1999:
  
                    Peter N. Larson                             59,554,507                3,976,802
  
                    Election of nominees to
                    Board of Directors for 
                    terms expiring in April, 2001:
  
                    Robert P. Bauman                            59,535,124                3,996,185
                    Robert H. Campbell                          59,554,462                3,976,847
                    Charles R. Shoemate                         59,555,690                3,975,619
                    Louis W. Sullivan, M.D                      59,530,631                4,000,678
  -------------------------------
  Votes For         Votes Against             Abstentions
                                                       ---------         -------------             -----------
  
                    Ratification of                   63,406,873              74,421                  50,015
                    Price Waterhouse LLP 
                    (now known as   
                    PricewaterhouseCoopers
                    LLP) as Independent
                    Accountants
  
                    -------------------------------
  
                                         23
  Votes For         Votes Against             Abstentions
                                                       ---------         -------------             -----------
  
                    Approval of Amendment              61,733,978          1,717,211                 80,120
                    to Article Fourth of the
                    Certificate of Incorporation
                    to increase the authorized
                    Common Stock from
                    200,000,000 shares, par
                    value $1.00 per share, to
                    600,000,000 shares, par
                    value $.25 per share, and
                    to effect a three-for-one
                    Common Stock split.
  Item 6.           Exhibits and Reports on Form 8-K.
  
                    (a)      See Exhibit Index.
  
                    (b)      During the quarterly  period ended June 30, 1998, and
                             as of the  filing  date,  CIGNA  filed the  following
                             Reports on Form 8-K:
  
                             o        dated July 30,  1998,  Item 5 - containing a
                                      news release  regarding  its second  quarter
                                      1998 results.
  
                             o        dated April 30, 1998,  Item 5 - containing a
                                      news  release  regarding  its first  quarter
                                      1998 results.
  
                                         24
  SIGNATURE
  
           Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
  the registrant has duly caused this report to be signed by the undersigned  duly
  authorized officer, on its behalf and in the capacity indicated.
  
                                              CIGNA CORPORATION
  
                                              By: /s/ Gary A. Swords
                                                 -------------------
                                                 Gary A. Swords
                                                 Vice President and
                                                 Chief Accounting Officer
  
  Date:    August 6, 1998
  
                                         25
  Exhibit Index
  Method of
  Number            Description                                            Filing
  ------            -----------                                          ---------
  3                 Restated Certificate of Incorporation                Filed herewith.
                    of the registrant effective as of
                    July 22, 1998
  
  4                 Description of Preferred Stock Purchase              Filed as Item 1 and
                    Rights, including the Amended and                    Exhibit 1 to the registrant's
                    Restated Rights Agreement dated as                   Form 8-A/A, Amendment
                    of July 22, 1998 between CIGNA                       No. 1, dated July 22, 1998
                    Corporation and First Chicago Trust                  and incorporated herein
                    Company of New York                                  by reference.
  
  10                Restated Restricted Stock Plan for                   Filed herewith.
                    Non-Employee Directors of CIGNA
                    Corporation dated as of April 22, 1998
  
  12                Computation of Ratio of                              Filed herewith.
                    Earnings to Fixed Charges
  
  27                Financial Data Schedule                              Included only in
                                                                         the EDGAR version
                                                                         of the Form 10-Q.
  
                                         26