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 September 30, 1997
  
                                         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, Philadelphia, Pa.     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 September 30, 1997,  74,057,237 shares of the issuer's Common Stock were
  outstanding.
  
  
  
  <PAGE>
  
                                  CIGNA CORPORATION
  
  
                                        INDEX
  
  
                                                                     Page No.
  
  PART I. FINANCIAL INFORMATION
  
          Item 1.   Financial Statements
  
                    Consolidated Statements of Income
                     and Retained Earnings                               1
                    Consolidated Balance Sheets                          2
                    Consolidated Statements of Cash Flows                3
                    Notes to Financial Statements                        4
  
          Item 2.   Management's Discussion and
                    Analysis of Financial Condition
                     and Results of Operations                           8
  
  
  PART II. OTHER INFORMATION
  
          Item 6.   Exhibits and Reports on Form 8-K                    19
  
  SIGNATURE                                                             20
  
  EXHIBIT INDEX                                                         21
  
  
  
  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  STATEMENTS  OF  INCOME  AND  RETAINED  EARNINGS
  (In millions, except per share amounts)
  <TABLE>
  <CAPTION>
                                                  Three Months Ended           Nine Months Ended
                                                    September 30,                 September 30,
                                                  1997          1996          1997         1996
  ==============================================================================================================================
  REVENUES
  <S>                                            <C>           <C>          <C>           <C>    
  Premiums and fees                              $3,925        $3,444       $10,795       $10,333
  Net investment income                           1,057         1,069         3,172         3,263
  Other revenues                                    175           154           498           448
  Realized investment gains                          25            18            81            17
                                               --------      --------      --------      --------
      Total revenues                              5,182         4,685        14,546        14,061
                                               --------      --------      --------      --------
  
  BENEFITS, LOSSES AND EXPENSES
  Benefits, losses and settlement expenses        3,359         3,064         9,433         9,337
  Policy acquisition expenses                       263           283           797           877
  Other operating expenses                        1,133           904         3,041         2,710
                                               --------      --------      --------      --------
      Total benefits, losses and expenses         4,755         4,251        13,271        12,924
                                               --------      --------      --------      --------
  
  INCOME BEFORE INCOME TAXES                        427           434         1,275         1,137
                                               --------      --------      --------      --------
  
  Income taxes:
      Current                                        86           152           320           264
      Deferred                                       62             1           109           123
                                               --------      --------      --------      --------
          Total taxes                               148           153           429           387
                                               --------      --------      --------      --------
  
  NET INCOME                                        279           281           846           750
  Common dividends declared                         (61)          (60)         (184)         (182)
  Retained earnings, beginning of period          5,299         4,388         4,855         4,041
  -----------------------------------------------------------------------------------------------
  
  RETAINED EARNINGS, END OF PERIOD               $5,517        $4,609        $5,517        $4,609
  ------------------------------------------=====================================================
  
  EARNINGS PER SHARE                              $3.72         $3.69        $11.31         $9.80
  ------------------------------------------=====================================================
  
  DIVIDENDS DECLARED PER SHARE                    $0.83         $0.80         $2.49         $2.40
  ------------------------------------------=====================================================
  </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>
                                                                               As of                     As of
                                                                             September 30,              December 31,
                                                                                1997                     1996
  ================================================================================================================
  <S>                                                                       <C>                     <C>  
  ASSETS
  Investments:
     Fixed maturities, at fair value (amortized cost, $33,817; $33,404)    $     35,630             $      34,933
     Equity securities, at fair value (cost, $715; $573)                            937                       701
     Mortgage loans                                                              10,813                    10,927
     Policy loans                                                                 7,252                     7,296
     Real estate                                                                  1,023                     1,102
     Other long-term investments                                                    231                       255
     Short-term investments                                                         887                     1,320
                                                                             -----------              ------------
         Total investments                                                       56,773                    56,534
  Cash and cash equivalents                                                       1,470                     1,287
  Accrued investment income                                                       1,088                       890
  Premiums, accounts and notes receivable                                         4,441                     4,229
  Reinsurance recoverables                                                        6,938                     7,287
  Deferred policy acquisition costs                                               1,291                     1,230
  Property and equipment                                                            868                       802
  Deferred income taxes                                                           1,765                     1,998
  Other assets                                                                      959                       993
  Goodwill and other intangibles                                                  2,545                     1,068
  Separate account assets                                                        28,290                    22,614
  ----------------------------------------------------------------------------------------------------------------
  
          Total assets                                                     $    106,428             $      98,932
  ---------------------------------------------------------------------------=====================================
  
  LIABILITIES
  Contractholder deposit funds                                             $     30,271             $      29,878
  Unpaid claims and claim expenses                                               18,434                    18,841
  Future policy benefits                                                         11,896                    11,784
  Unearned premiums                                                               1,852                     1,940
                                                                             -----------              ------------
           Total insurance and contractholder liabilities                        62,453                    62,443
  Accounts payable, accrued expenses and other liabilities                        5,775                     5,326
  Current income taxes                                                              172                       221
  Short-term debt                                                                   444                       289
  Long-term debt                                                                  1,499                     1,021
  Separate account liabilities                                                   28,094                    22,424
  ----------------------------------------------------------------------------------------------------------------
           Total liabilities                                                     98,437                    91,724
  ----------------------------------------------------------------------------------------------------------------
  
  CONTINGENCIES - NOTE 8
  
  SHAREHOLDERS' EQUITY
  Common stock (shares issued, 88)                                                   88                        88
  Additional paid-in capital                                                      2,631                     2,572
  Net unrealized appreciation, fixed maturities                                     620                       539
  Net unrealized appreciation, equity securities                                    149                        88
  Net translation of foreign currencies                                             (66)                      (45)
  Retained earnings                                                               5,517                     4,855
  Less treasury stock, at cost                                                     (948)                     (889)
  ----------------------------------------------------------------------------------------------------------------
           Total shareholders' equity                                             7,991                     7,208
  ----------------------------------------------------------------------------------------------------------------
  
           Total liabilities and shareholders' equity                      $    106,428             $      98,932
  ---------------------------------------------------------------------------=====================================
  
  SHAREHOLDERS' EQUITY PER SHARE                                           $     107.90             $        97.15
  ---------------------------------------------------------------------------=====================================
  </TABLE>
  
  The Notes to Financial Statements are an integral part of these statements.
  
                                          2
  
  <PAGE>
  
  CIGNA  CORPORATION
  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
  (In millions)
  <TABLE>
  <CAPTION>
                                                                                           Nine Months Ended September 30,
                                                                                          1997                        1996
  ============================================================================================================================
  <S>                                                                                 <C>                         <C>        
  CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                                                      $       846                 $       750
      Adjustments to reconcile net income to net cash
          provided by (used in) operating activities:
              Insurance liabilities, net of reinsurance recoverables                          168                        (201)
              Premiums, accounts and notes receivable                                         (99)                        (39)
              Accounts payable, accrued expenses, other liabilities and
                  current income taxes                                                        (26)                       (123)
              Deferred income taxes                                                           109                         123
              Realized investment (gains)                                                     (81)                        (17)
              Gain on sale of businesses and other equity interests                             -                         (18)
              Other, net                                                                     (195)                       (134)
                                                                                        ----------                  ----------
              Net cash provided by operating activities                                       722                         341
                                                                                        ----------                  ----------
  
  CASH FLOWS FROM INVESTING ACTIVITIES
      Proceeds from investments sold:
          Fixed maturities                                                                  4,491                       4,925
          Equity securities                                                                   204                         304
          Mortgage loans                                                                      465                         315
          Other (primarily short-term investments)                                         11,029                       8,871
      Investment maturities and repayments:
          Fixed maturities                                                                  2,588                       2,891
          Mortgage loans                                                                      446                         542
      Investments purchased:
          Fixed maturities                                                                 (7,328)                     (6,879)
          Equity securities                                                                  (347)                       (317)
          Mortgage loans                                                                     (908)                     (1,247)
          Other (primarily short-term investments)                                        (10,111)                     (8,627)
      Net cash from acquisitions and dispositions                                          (1,339)                         66
      Other, net                                                                             (115)                       (106)
                                                                                        ----------                  ----------
          Net cash provided by (used in) investing activities                                (925)                        738
                                                                                        ----------                  ----------
  
  CASH FLOWS FROM FINANCING ACTIVITIES
      Deposits and interest credited to contractholder deposit funds                        5,384                       4,900
      Withdrawals and benefit payments from contractholder deposit funds                   (5,181)                     (4,944)
      Net issuance (repayment) of short-term debt                                             104                         (11)
      Issuance of long-term debt                                                              600                           -
      Repurchase of common stock                                                              (55)                       (161)
      Repayment of long-term debt including current portion                                  (276)                       (158)
      Common dividends paid                                                                  (182)                       (180)
      Other, net                                                                               11                          11
                                                                                        ----------                  ----------
         Net cash provided by (used in) financing activities                                  405                        (543)
                                                                                        ----------                  ----------
  Effect of foreign currency rate changes on cash and cash equivalents                        (19)                         (7)
  ----------------------------------------------------------------------------------------------------------------------------
  Net increase in cash and cash equivalents                                                   183                         529
  Cash and cash equivalents, beginning of period                                            1,287                       1,559
  ----------------------------------------------------------------------------------------------------------------------------
  
  Cash and cash equivalents, end of period                                            $     1,470                 $     2,088
  --------------------------------------------------------------------------------------======================================
  
  Supplemental Disclosure of Cash Information:
      Income taxes paid, net of refunds                                               $       333                 $       194
      Interest paid                                                                   $        82                 $        88
  ----------------------------------------------------------------------------------------------------------------------------
  </TABLE>
  
  The Notes to Financial Statements are an integral part of these statements.
  
                                          3
  <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 1997
  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.
  
  
  NOTE 2-NEW ACCOUNTING PRONOUNCEMENT
  
  In 1997, the Financial  Accounting Standards Board issued Statement of Financial
  Accounting  Standards  (SFAS) No. 128,  "Earnings per Share (EPS)." SFAS No. 128
  replaces  primary  EPS with basic EPS,  which is  computed  using only  weighted
  average common shares outstanding  without considering common stock equivalents.
  Diluted EPS under SFAS No. 128 is computed  similarly to fully diluted EPS. SFAS
  No. 128 also requires dual  presentation of basic and diluted EPS on the face of
  the income  statement.  Adoption is required as of December 31,  1997,  at which
  time all prior  periods must be restated.  The effect on CIGNA's EPS of adopting
  SFAS No. 128 is not expected to be material.
  
  
  
  NOTE 3-ACQUISITIONS AND DISPOSITIONS
  
  At the end of the second quarter of 1997, CIGNA acquired the outstanding  common
  stock of Healthsource, Inc. (Healthsource). The cost of the acquisition was $1.7
  billion, reflecting the purchase of Healthsource's common stock for $1.4 billion
  in June 1997 and the  retirement  of  Healthsource  debt of  approximately  $250
  million in the third  quarter of 1997.  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.  Intangible
  assets and goodwill of $1.5 billion are being amortized on a straight-line basis
  over periods ranging from eight to 40 years.
  
  In the fourth  quarter of 1997,  CIGNA  expects  to 1)  complete  its fair value
  analysis  of  Healthsource's  net  assets;  2)  finalize  plans for  integrating
  Healthsource  with CIGNA and 3) finalize plans for restructuring its health care
  operations.  The effect on net income from these  initiatives  is not reasonably
  estimable  at this time;  however,  the charge is not  expected  to exceed  $125
  million after-tax.
  
  Healthsource's  total  revenues  were $971  million and $1.7 billion for the six
  months  ended June 30,  1997 and for the full year 1996,  respectively.  The pro
  forma effect on CIGNA's net income was not material.
  
  In July 1997,  CIGNA  entered  into an  agreement  to sell its  individual  life
  insurance and annuity businesses, which are included in the Individual Financial
  Services  segment,  for  cash  proceeds  of $1.4  billion.  Revenues  for  these
  businesses  were $230  million and $703  million for the third  quarter and nine
  months of 1997,  respectively,  compared  with $227 million and $671 million for
  the same periods  last year.  Net income was $24 million and $72 million for the
  third quarter and nine months of 1997,  respectively,  compared with $21 million
  and $45 million for the same periods of 1996.
  
  
                                          4
  
  <PAGE>
  Completion  of the sale,  which is  anticipated  to occur by the end of 1997, is
  subject to  regulatory  approvals.  The  agreement to sell these  businesses  is
  generally in the form of an indemnity reinsurance  arrangement,  and is expected
  to result in an after-tax  gain on the sale of  approximately  $700  million.  A
  significant  portion of the gain will be  deferred  and  amortized  over  future
  periods.  Proceeds  from the sale are expected to be used for  internal  growth,
  acquisitions,  and share repurchases,  with share repurchases being the expected
  use in the near term.
  
  CIGNA had other acquisitions and dispositions during the nine months of 1997 and
  1996, 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           Nine Months
                                   Ended                  Ended
                               September 30,          September 30,
  (In millions)              1997        1996        1997       1996
  ---------------------------------------------------------------------
  Realized investment 
  gains (losses):
       Fixed maturities           $6           $3        $35        $--
       Equity securities          19            4         33         13
       Mortgage loans             (3)          --        (17)       (20)
       Real estate                 3            6         20          7
       Other                      --            5         10         17
                           ---------  ----------- ----------  ---------
                                  25           18         81         17
  Less income taxes                8            7         27          8
  ---------------------------------------------------------------------
  Net realized investment
  gains                          $17          $11        $54         $9
  =====================================================================
  
  Fixed Maturities and Equity Securities
  
  Sales of  available-for-sale  fixed maturities and equity securities, including
  policyholder share, were as follows:
  
  ---------------------------------------------------------------------
                                Three Months           Nine Months
                                   Ended                  Ended
                               September 30,          September 30,
  (In millions)              1997        1996        1997       1996
  ---------------------------------------------------------------------
  
  Proceeds from sales      $1,417       $1,544     $4,695     $5,209
  Gross gains on sales         55           46        141        140
  Gross losses on sales       (10)         (40)       (70)      (120)
  ---------------------------------------------------------------------
  
  Net unrealized appreciation for investments carried at fair value is included as
  a  separate  component  of  Shareholders'  Equity,  net of  policyholder-related
  amounts and deferred  income taxes.  The net unrealized  appreciation  for these
  investments,  primarily  fixed  maturities,  during the third  quarter  and nine
  months  of 1997  increased  by $200  million  and  $142  million,  respectively,
  compared  with an increase of $2 million and a decrease of $565  million for the
  same periods last year.
  
  NOTE 5-EARNINGS PER SHARE
  
  Earnings per share were based on net income  divided by weighted  average common
  shares, including common share equivalents, as follows:
  
  ---------------------------------------------------------------------
                                Three Months           Nine Months
                                   Ended                  Ended
                               September 30,          September 30,
  (In thousands)             1997        1996        1997       1996
  ---------------------------------------------------------------------
  Weighted average
  common shares               75,041       76,055     74,791     76,585
  ---------------------------------------------------------------------
  
  There is no significant difference between earnings per share on a primary and a
  fully diluted basis.
  
  Common  shares held as Treasury  shares were  13,841,468  and  12,390,283  as of
  September 30, 1997 and 1996, respectively.
  
  NOTE 6-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 1990, 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 in connection with this issue. The decision did not have an effect
  on results of operations,  as adequate reserves had been previously established.
  As a result of this ruling,  CIGNA made payments of  approximately  $100 million
  prior to September 30, 1997 and an additional $150 million in the fourth quarter
  of 1997.  CIGNA plans to appeal the U.S. Tax Court decision to the U.S. Court of
  Appeals.
  
  As of September 30, 1997, CIGNA had no tax basis operating loss carryforwards.
  
                                          5
  <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 $719 million and
  $711 million as of September 30, 1997 and December 31, 1996, respectively. While
  future charges for  unrecoverable  reinsurance may materially  affect results of
  operations in future  periods,  such amounts are not expected to have a material
  adverse effect on CIGNA's liquidity or financial condition.
  
  For the third  quarter  and nine months of 1997,  premiums  and fees were net of
  ceded  premiums of $448 million and $1.5  billion,  respectively.  For the third
  quarter and nine months of 1996, premiums and fees were net of ceded premiums of
  $619 million and $1.6 billion,  respectively.  In addition, benefits, losses and
  settlement  expenses  for the third  quarter and nine months of 1997 were net of
  reinsurance recoveries of $376 million and $1.1 billion, respectively. Benefits,
  losses and  settlement  expenses  for the third  quarter and nine months of 1996
  were  net  of   reinsurance   recoveries  of  $410  million  and  $1.2  billion,
  respectively.
  
  
  NOTE 8-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.
  
  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   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   reform health care.
  
  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. CIGNA does not expect this legislation to have a
  material  effect  on  its  consolidated  results  of  operations,  liquidity  or
  financial condition.
  
  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.
  
  Various federal and state  proposals have been made to place  limitations on the
  formation and operation of efficient health care networks.  Due to uncertainties
  associated  with the timing and  content of any  health  care  legislation,  the
  effect on CIGNA's future results of operations, liquidity or financial condition
  cannot be reasonably estimated at this time.
  
  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.
  
                                          6
  <PAGE>
  The NAIC is currently developing  standardized  statutory accounting principles,
  which are scheduled to take effect in 1999. The effect on CIGNA's  statutory net
  income, surplus and liquidity cannot be reasonably estimated at this time.
  
  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.
  
  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.
  
                                          7
  <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  September  30, 1997,  compared  with  December 31, 1996,  and its
  results of operations for the quarter and nine months ended  September 30, 1997,
  compared  with the same periods  last year.  This  discussion  should be read in
  conjunction with  Management's  Discussion and Analysis included in CIGNA's 1996
  Annual Report to Shareholders (pages 8 through 21) and in CIGNA's report on Form
  10-Q for the first and second  quarters of 1997, 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.
  
  At the end of the second quarter of 1997, CIGNA acquired the outstanding  common
  stock of Healthsource, Inc. (Healthsource). The cost of the acquisition was $1.7
  billion, reflecting the purchase of Healthsource's common stock for $1.4 billion
  in June 1997 and the  retirement  of  Healthsource  debt of  approximately  $250
  million in the third  quarter of 1997.  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.  Intangible
  assets and goodwill of $1.5 billion are being amortized on a straight-line basis
  over periods ranging from eight to 40 years.
  
  In the fourth  quarter of 1997,  CIGNA  expects  to 1)  complete  its fair value
  analysis  of  Healthsource's  net  assets;  2)  finalize  plans for  integrating
  Healthsource  with CIGNA and 3) finalize plans for restructuring its health care
  operations.  The effect on net income from these  initiatives  is not reasonably
  estimable  at this time;  however,  the charge is not  expected  to exceed  $125
  million after-tax.
  
  Healthsource's  total  revenues  were $971  million and $1.7 billion for the six
  months  ended June 30,  1997 and for the full year 1996,  respectively.  The pro
  forma effect on CIGNA's net income was not material.
  
  In July 1997,  CIGNA  entered  into an  agreement  to sell its  individual  life
  insurance  and  annuity  businesses  for cash  proceeds of $1.4  billion.  These
  businesses,  which are included in the Individual  Financial  Services  segment,
  reported the following results:
  
    ==============================================================
                             Three Months Ended  Nine Months Ended
                                September 30,       September 30,
   (In millions)               1997      1996      1997     1996
    --------------------------------------------------------------
    Revenues                    $230      $227      $703     $671
    Operating income *           $26       $21       $70      $45
    Net income                   $24       $21       $72      $45
    ==============================================================
  
  Completion  of the sale,  which is  anticipated  to occur by the end of 1997, is
  subject to  regulatory  approvals.  The  agreement to sell these  businesses  is
  generally in the form of an indemnity reinsurance  arrangement,  and is expected
  to result in an after-tax  gain on the sale of  approximately  $700  million.  A
  significant  portion of the gain will be  deferred  and  amortized  over  future
  periods.  Proceeds  from the sale are expected to be used for  internal  growth,
  acquisitions,  and share repurchases,  with share repurchases being the expected
  use in the near term.
  
  CIGNA continues to conduct  strategic and financial reviews of its businesses in
  order to deploy its capital most effectively.
  
  CIGNA is currently  analyzing and modifying or replacing its information systems
  to ensure that they are capable of processing  information for the Year 2000 and
  beyond. The costs of these efforts are not expected to have a material effect on
  CIGNA's results of operations. In addition, CIGNA has relationships with various
  third party  entities in its  ordinary  course of business.  Where  practicable,
  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 are not expected to be material, however, litigation costs to defend
  or deny such claims are not reasonably  estimable at this time.
  
  ___________________________________
  * Operating  income (loss) is defined as net income (loss)  excluding  after-tax
    realized investment results.
  
                                         8
  <PAGE>
  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 1990, 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 in connection with this issue. The decision did not have an effect
  on results of operations,  as adequate reserves had been previously established.
  As a result of this ruling,  CIGNA made payments of  approximately  $100 million
  prior to September 30, 1997 and an additional $150 million in the fourth quarter
  of 1997.  CIGNA plans to appeal the U.S. Tax Court decision to the U.S. Court of
  Appeals.
  
  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    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    reform health care.
  
  The eventual  effect on CIGNA of the changing  environment  in which it operates
  remains  uncertain.  For  additional  information,  see Note 8 to the  Financial
  Statements.
  
  
  CONSOLIDATED RESULTS OF OPERATIONS
  
  ================================================================
  FINANCIAL SUMMARY          Three Months Ended  Nine Months Ended
                                September 30,      September 30,
  (In millions)                 1997     1996      1997      1996
  ----------------------------------------------------------------
  Premiums and fees           $3,925   $3,444   $10,795   $10,333
  Net investment income        1,057    1,069     3,172     3,263
  Other revenues                 175      154       498       448
  Realized investment
  gains                           25       18        81        17
                          ----------------------------------------
  Total revenues               5,182    4,685    14,546    14,061
  Benefits and expenses        4,755    4,251    13,271    12,924
                          ----------------------------------------
  Income before taxes            427      434     1,275     1,137
  Income taxes                   148      153       429       387
                          ----------------------------------------
  Net income                    $279     $281      $846      $750
  ------------------------========================================
  Realized investment
  gains, net of taxes            $17      $11       $54        $9
  ------------------------========================================
  
  CIGNA's 1997  consolidated  net income  decreased  1% for the third  quarter and
  increased  13% for the nine  months,  compared  with the same periods last year.
  Operating  income for the third quarter and nine months of 1997 was $262 million
  and $792  million,  respectively,  compared  with $270 million and $741 million,
  respectively,  for the same periods last year. The decrease in operating  income
  for the third  quarter  reflects  increased  losses in Other  Operations,  which
  include  the  financing  costs  associated  with the  Healthsource  acquisition.
  Improvements in all of the business  segments  partially  offset these increased
  losses.  For  the  nine  months,   operating  income  increased  7%,  reflecting
  improvement  in all of the  business  segments,  partially  offset by  increased
  losses in Other Operations.
  
  After-tax  realized  investment  results improved for the third quarter and nine
  months of 1997 from the same  periods last year.  Results for the third  quarter
  primarily  reflect  higher  gains  on  sales  of  equity  securities  and  fixed
  maturities, partially offset by higher impairment losses on fixed maturities and
  mortgage  loans.  Results for the nine months  reflect  higher gains on sales of
  fixed  maturities,  equity  securities and real estate as well as lower mortgage
  loan impairment losses. For additional information,  see Note 4 to the Financial
  Statements.
  
  Full year operating  income for 1997 is expected to improve over 1996.  However,
  such  improvement  could  be  adversely  affected  by the  factors  noted in the
  cautionary statement on page 18.
  
                                         9
  <PAGE>
  
  EMPLOYEE LIFE AND HEALTH BENEFITS
  
  ================================================================
  FINANCIAL SUMMARY          Three Months Ended  Nine Months Ended
                                September 30,       September 30,
  (In millions)                1997      1996     1997      1996
  ----------------------------------------------------------------
  Premiums and fees           $2,572    $2,036   $6,792    $6,188
  Net investment income          142       136      415       423
  Other revenues                 116        99      340       301
  Realized investment
  gains (losses)                  (6)         4        1       (5)
                          ----------------------------------------
  Total revenues               2,824     2,275    7,548     6,907
  Benefits and expenses        2,629     2,071    6,981     6,362
                          ----------------------------------------
  Income before taxes            195       204      567       545
  Income taxes                    71        74      194       188
                          ----------------------------------------
  Net income                    $124      $130     $373      $357
  ------------------------========================================
  Realized investment
  gains (losses), net of
  taxes                          ($4)        $3       $2      ($3)
  ------------------------========================================
  
  Net income for the Employee Life and Health  Benefits  segment  decreased 5% for
  the third  quarter and  increased 4% for the nine months of 1997,  compared with
  the same periods last year.
  
  Operating income for the Indemnity and HMO operations was as follows:
  
  ================================================================
                             Three Months Ended   Nine Months Ended
                                September 30,       September 30,
  (In millions)                1997       1996     1997      1996
  ----------------------------------------------------------------
  Indemnity operations          $76        $73     $202      $198
  HMO operations                 52         54      169       162
  ----------------------------------------------------------------
  Total                        $128       $127     $371      $360
  ================================================================
  
  Indemnity  operating  income  increased 4% and 2% for the third quarter and nine
  months of 1997,  respectively,  compared with the same periods last year.  Third
  quarter 1996 results  reflect the  unfavorable  after-tax  effects of $7 million
  from reserve  reviews.  Excluding this item,  operating income for 1997 declined
  5%. This decline reflects  unfavorable  long-term  disability claim  experience,
  partially  offset by improved  results from guaranteed cost medical business and
  earnings from Healthsource  operations.  Results for the nine months of 1997 and
  1996 include  unfavorable  after-tax  adjustments  of $3 million and $9 million,
  respectively,  from reserve reviews.  Excluding these items,  earnings were $205
  million and $207 million for the nine months ended  September 30, 1997 and 1996,
  respectively.  This decrease reflects higher operating expenses primarily due to
  customer service  initiatives,  and lower investment income resulting from lower
  average assets and yields, partially offset by improved claim experience.
  
  HMO  results  for  the  third  quarter  of  1996  include  favorable   after-tax
  adjustments of $7 million from reserve  reviews.  Results for the nine months of
  1997 and 1996 include  favorable  after-tax  adjustments  of $13 million and $12
  million,  respectively,  from  reserve  reviews and the nine months of 1996 also
  include  a  first  quarter  after-tax  gain  of $8  million  from  the  sale  of
  subsidiaries.  Excluding  these items,  HMO  earnings  were $52 million and $156
  million for the third  quarter and nine months of 1997,  respectively,  compared
  with $47 million and $142 million, respectively, for the same periods last year.
  These  higher  earnings  are due to improved  results in the dental  operations,
  primarily  reflecting  rate  increases,  cost controls,  and membership  growth.
  Results in 1997 for the medical HMOs were about level with the same periods last
  year,  reflecting  rate  increases and membership  growth,  offset by higher HMO
  medical costs,  higher  operating  expenses  associated with growth and customer
  service initiatives, and Healthsource losses after goodwill.
  
  Premiums and fees increased 26% and 10% for the third quarter and nine months of
  1997, respectively, compared to the same periods last year, primarily reflecting
  the addition of  Healthsource.  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 4% for the third  quarter of 1997 compared to
  1996 primarily due to the addition of assets related to Healthsource,  partially
  offset by lower yields.  The 2% decrease for the nine months of 1997 compared to
  1996 is primarily a result of lower yields,  partially offset by the addition of
  assets related to Healthsource.
  
  Total HMO  membership  increased  36%  since  September  30,  1996 and 35% since
  December 31, 1996.  Healthsource  accounts for 78% and 79%, of these  increases,
  respectively.  The remaining  increases  primarily reflect  membership growth in
  CIGNA's HMO alternative  funding programs.  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 third quarter and nine months of 1997 were
  
                                         10
  <PAGE>
  
  approximately  $3.0  billion  and  $7.8  billion,  respectively.  These  amounts
  represent  an  increase  of 29% and 9%,  respectively,  compared  with  the same
  periods last year primarily  reflecting  Healthsource.  Excluding  Healthsource,
  premium equivalents for alternative funding programs were about level with 1996,
  reflecting  growth in HMOs offset by  cancellations  and  conversions of medical
  indemnity business to HMOs.  Premium  equivalents are expected to continue to be
  constrained  by  competitive  pressures  in both the medical  indemnity  and HMO
  markets.
  
  Premium  equivalents  were 54% of total adjusted  premiums and fees for the nine
  months of 1997 and 1996.  Administrative Services Only (ASO) plans accounted for
  50% and 48% of total adjusted  premiums and fees for the nine months of 1997 and
  1996, respectively.
  
  EMPLOYEE RETIREMENT AND SAVINGS BENEFITS
  
  ================================================================
  FINANCIAL SUMMARY          Three Months Ended  Nine Months Ended
                                September 30,       September 30,
  (In millions)                1997       1996     1997      1996
  ----------------------------------------------------------------
  Premiums and fees             $40        $55     $138      $143
  Net investment income         393        419    1,192     1,278
  Realized investment
  gains (losses)                 (3)         9       11        19
                          ----------------------------------------
  Total revenues                430        483    1,341     1,440
  Benefits and expenses         355        398    1,095     1,204
                          ----------------------------------------
  Income before taxes            75         85      246       236
  Income taxes                   24         28       79        78
                          ----------------------------------------
  Net income                    $51        $57     $167      $158
  ------------------------========================================
  Realized investment
  gains (losses), net of
  taxes                         ($2)        $5       $7       $11
  ------------------------========================================
  
  Net income for the Employee  Retirement and Savings Benefits  segment  decreased
  11%  and   increased  6%  for  the  third  quarter  and  nine  months  of  1997,
  respectively,  compared  with the same  periods  of 1996.  Results  for the nine
  months of 1996 include an after-tax charge of $8 million for state guaranty fund
  assessments.  Excluding the above charge,  operating  income was $53 million and
  $160  million  for the third  quarter  and nine  months  of 1997,  respectively,
  compared with $52 million and $155 million,  respectively,  for the same periods
  last year. These increases reflect higher earnings from an increased asset base,
  partially  offset by a shift to lower margin products  (separate  account equity
  funds) and higher operating expenses related to growth initiatives.
  
  Premiums and fees  decreased 27% and 3% for the third quarter and nine months of
  1997,  respectively,  reflecting lower annuity sales, partially offset by higher
  fees from separate accounts.
  
  Net investment  income decreased 6% and 7% for the third quarter and nine months
  of 1997, respectively, compared with the same periods last year. 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 nine months ended  September 30, assets under  management  and
  related activity,  including amounts attributable to separate accounts,  were as
  follows:
  
  ================================================================
  (In millions)                                1997         1996
  ----------------------------------------------------------------
  Balance -- January 1                       $40,587      $38,183
  Premiums and deposits                        5,207        4,478
  Investment results                           1,846        1,977
  Increase (decrease) in fair value of         2,946        (421)
  assets
  Customer withdrawals                        (1,679)      (1,596)
  Other, including participant    
  withdrawals and benefit payments            (3,494)      (3,542)
  ----------------------------------------------------------------
  Balance -- September 30                    $45,413      $39,079
  ================================================================
  
  Premiums and deposits  increased  16% in the nine months of 1997,  compared with
  the same period in 1996. Of this  increase,  approximately  57% reflects  higher
  recurring   deposits  from  existing  customers  while  the  remaining  increase
  represents sales to new customers.  Sales to new customers and new plan sales to
  existing  customers were approximately 47% of premiums and deposits for the nine
  months of 1997 and 1996.  The  decrease in  investment  results  reflects  lower
  capital  gains in 1997  compared  with 1996 and  lower  investment  yields.  The
  increase  for  1997  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 in fixed maturities in the general account.
  
  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.
  
                                         11
  <PAGE>
  
  INDIVIDUAL FINANCIAL SERVICES
  
  ================================================================
  FINANCIAL SUMMARY          Three Months Ended  Nine Months Ended
                                 September 30,      September 30,
  (In millions)                 1997      1996     1997      1996
  ----------------------------------------------------------------
  Premiums and fees             $248      $233     $731      $678
  Net investment income          274       257      805       780
  Other revenues                  17        20       46        58
  Realized investment
  gains (losses)                  (4)       --        7        --
                          ----------------------------------------
  Total revenues                 535       510    1,589     1,516
  Benefits and expenses          460       438    1,357     1,330
                          ----------------------------------------
  Income before taxes             75        72      232       186
  Income taxes                    26        25       81        65
                          ----------------------------------------
  Net income                     $49       $47     $151      $121
  ------------------------========================================
  Realized investment
  gains (losses), net of
  taxes                          ($2)      $--       $5       $--
  ------------------------========================================
  
  Net income for the Individual  Financial  Services segment  increased 4% and 25%
  for the third quarter and nine months of 1997,  respectively,  compared with the
  same periods last year. Results for the third quarter and nine months include an
  after-tax  benefit of $4 million for both periods in 1997 and for 1996 after-tax
  benefits of $5 million and $2 million,  respectively,  from  reserve and account
  reviews.  Excluding  these  items,  operating  income was $47  million  and $142
  million for the third  quarter and nine months of 1997,  respectively,  compared
  with $42 million and $119 million, respectively, for the same periods last year.
  These increases primarily reflect favorable mortality and business growth, which
  for the nine months  were  partially  offset by lower  earnings  from  leveraged
  corporate-owned life insurance (COLI).
  
  For the third  quarter and nine months of 1997,  premiums and fees  increased 6%
  and 8%,  respectively,  compared with the same periods of 1996.  These increases
  primarily reflect growth in reinsurance and interest  sensitive  products.  This
  growth was partially offset by lower COLI renewal premiums.
  
  Net investment  income increased 7% and 3% for the third quarter and nine months
  of 1997,  respectively.  These increases  primarily  reflect asset growth in the
  non-leveraged corporate-owned life insurance and annuity businesses.
  
  In 1996,  Congress passed  legislation that phases out over a three-year  period
  the tax  deductibility of policy loan interest for most leveraged COLI products.
  Revenues of $432 million and operating income of $31 million for the nine months
  of 1997 were from leveraged COLI products that are affected by this legislation.
  CIGNA  does  not  expect  this  legislation  to have a  material  effect  on its
  consolidated results of operations, liquidity or financial condition.
  
  A significant  portion of this  segment's  businesses are expected to be sold by
  the end of 1997. See page 8 for further discussion.
  
  PROPERTY AND CASUALTY
  
  ================================================================
  FINANCIAL SUMMARY          Three Months Ended  Nine Months Ended
                                 September 30,       September 30,
  (In millions)                 1997      1996      1997     1996
  ----------------------------------------------------------------
  Premiums and fees           $1,065    $1,120    $3,134   $3,324
  Net investment income          190       201       574      606
  Other revenues                  72        63       209      176
  Realized investment
  gains                           35         2        59        2
                          ----------------------------------------
  Total revenues               1,362     1,386     3,976    4,108
  Benefits and expenses        1,241     1,301     3,669    3,880
                          ----------------------------------------
  Income before taxes            121        85       307      228
  Income taxes                    39        26        94       68
                          ----------------------------------------
  Net income                     $82       $59      $213     $160
  ------------------------========================================
  Realized investment
  gains, net of taxes            $23        $1       $38       $1
  ------------------------========================================
  
  Net income for the Property and Casualty  segment  increased 39% and 33% for the
  third  quarter and nine  months of 1997,  respectively,  compared  with the same
  periods last year.
  
  Operating  income  increased 2% and 10% for the third quarter and nine months of
  1997, respectively, compared with the same periods in 1996. Operating income for
  the ongoing and run-off operations was as follows:
  
  ================================================================
                             Three Months Ended  Nine Months Ended
                                September 30,       September 30,
  (In millions)                1997      1996      1997      1996
  ----------------------------------------------------------------
  Ongoing operations:
    International               $33       $37      $102      $102
  
    Domestic                     26        20        72        52
                         -----------------------------------------
      Total ongoing              59        57       174       154
        operations
  Run-off operations             --         1         1         5
  ----------------------------------------------------------------
      Total                     $59       $58      $175      $159
  ================================================================
  
  International results for the nine months of 1997 include a $6 million after-tax
  charge  for cost  reduction  initiatives,  primarily  severance.  For the  third
  quarter and nine months of 1996,  International  results  include $4 million for
  favorable prior year 
  
                                         12
  <PAGE>
  
  development  and, for the quarter,  $3 million for  improved  claim  experience.
  Excluding these items, operating income for the third quarter and nine months of
  1997 was $33 million and $108 million,  respectively,  compared with $30 million
  and $98 million,  respectively,  for the same periods last year. These increases
  are primarily  attributable to improved  international  life insurance  results.
  Improvement  in  Domestic  operations'  results  for the third  quarter and nine
  months primarily reflects lower catastrophes, partially offset by lower premiums
  and fees in 1997. Results for International and Domestic  operations continue to
  reflect a highly competitive pricing environment.
  
  Premiums  and fees  declined  5% and 6% in the third  quarter and nine months of
  1997,  respectively,  compared with the same periods last year.  These  declines
  primarily  reflect  strict   underwriting   standards,   continued   competition
  (particularly in domestic  casualty,  large risk property and commercial package
  lines of business),  and an unfavorable effect from foreign currency translation
  (approximately $25 million and $95 million, respectively).  Strong growth in the
  international  accident  and health  line of  business  partially  offset  these
  declines.
  
  Domestic  operations  had  pre-tax  catastrophe  losses  of $2  million  and $16
  million,  net of  reinsurance,  for the third  quarter  and nine months of 1997,
  respectively,  compared with $27 million and $58 million,  respectively, for the
  same periods of 1996.  Catastrophe  losses for the third quarter and nine months
  of 1996 include $20 million for Hurricane Fran.  Catastrophe losses for the nine
  months of 1996 include $21 million for East Coast winter storms.  The effects of
  reinsurance on catastrophe  losses for the periods  presented were not material.
  International operations had no catastrophe losses in the third quarter and nine
  months of 1997 and 1996.
  
  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.
  
  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 1996 Form 10-K.
  
  CIGNA's  property and casualty  loss reserves of $16.0 billion and $16.5 billion
  as of September 30, 1997 and December 31, 1996, 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  refines its loss estimation process by improving the 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
  
                                         13
  <PAGE>
  
  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  $6.4  billion  and $6.8
  billion as of September  30, 1997 and December  31, 1996,  respectively,  net of
  allowances  for  unrecoverable  reinsurance  of $719  million and $711  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 nine months ended September
  30:
  
  ================================================================
                              Three Months Ended  Nine Months Ended
                                 September 30,      September 30,
  (In millions)                 1997      1996      1997     1996
  ----------------------------------------------------------------
  By business operation:
    Ongoing operations            $8       ($2)      $22      $15
    Run-off operations            50        38       150      110
  ================================================================
  Total                          $58       $36      $172     $125
  ================================================================
  By type of loss:
    Asbestos-related             $20       $13       $68      $27
    Environmental
       pollution                   8         5        22       31
    Unrecoverable
       reinsurance                 6         2        15       20
    Workers' compensation         18        17        36       36
    Other                          6        (1)       31       11
  ================================================================
  Total                          $58       $36      $172     $125
  ================================================================
  
  Other prior year  development  for the third quarter and nine months of 1997 was
  primarily attributable to assumed reinsurance and long-term exposures.
  
  OTHER OPERATIONS
  
  Other Operations  includes  unallocated  investment income,  expenses (including
  debt service and new business  initiatives),  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.
  
   Other  Operations  had net losses of $27  million and $58 million for the third
  quarter and nine months of 1997,  respectively,  compared with net losses of $12
  million and $46 million,  respectively, for the same periods in 1996. Net losses
  included after-tax realized investment gains of $2 million for the third quarter
  and nine  months of 1997 and the third  quarter of 1996.  There were no realized
  investment  gains or losses for the nine months of 1996.  The increase in losses
  primarily reflects financing costs associated with the Healthsource  acquisition
  and 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 nine months of 1997,  cash and cash  equivalents  increased $183 million
  from $1.3 billion as of December 31, 1996. The increase  primarily reflects cash
  provided by operating activities ($722 million),  due to earnings and the timing
  of  operating  cash  receipts  and  disbursements;  proceeds on the  issuance of
  long-term  debt  ($600  million)  and net  proceeds  on  short-term  debt  ($104
  million).  These  increases  were  partially  offset by cash  used in  investing
  activities  ($925  million,  which  includes  the $1.3  billion  acquisition  of
  Healthsource   partially   offset  by  net  investment   sales);   repayment  of
  Healthsource debt  (approximately $250 million) and payments of dividends on and
  repurchases of CIGNA common stock ($237  million).  For  additional  information
  regarding the funding of the Healthsource acquisition, see page 8.
  
  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 $1.5  billion of long-term  debt  outstanding  at September  30, 1997,
  compared  with $1.02  billion at December  31,  1996.  This  increase
  
                                         14
  <PAGE>
  primarily  reflects issuance in May 1997 of $300 million of 7.4% unsecured Notes
  due in 2007 and $300 million of 7.875%  unsecured  Debentures  due in 2027.  The
  proceeds from these issues were used to finance the acquisition of Healthsource.
  As of  September  30,  1997,  CIGNA  had $200  million  remaining  under a shelf
  registration statement that may be issued as debt or equity securities, or both,
  depending upon market conditions and CIGNA's capital requirements.
  
  At September 30, 1997,  CIGNA's  short-term  debt  amounted to $444 million,  an
  increase of $155 million from December 31, 1996. The increase primarily reflects
  higher  borrowings  to fund  working  capital  needs  arising as a result of the
  redemption of the Healthsource debt in the third quarter of 1997.
  
  In October 1997,  Standard and Poor's raised its ratings on CIGNA's  senior debt
  to A from A-, and on CIGNA's commercial paper to A-1 from A-2.
  
  In October 1997, CIGNA's Board of Directors  increased CIGNA's  authorization to
  repurchase its common stock by $500 million.  Stock  repurchases  will depend on
  prevailing market conditions and alternative uses of capital. During 1997, CIGNA
  has  repurchased  927,000  shares for $149  million,  including  587,000  shares
  repurchased  for $100  million  from  October 1 through  November  5, 1997.  The
  remaining authorization as of November 5, 1997 is $552 million.
  
  INVESTMENT ASSETS
  ================================================================
                                     September 30,     December 31,
  (In millions)                          1997              1996
  ----------------------------------------------------------------
  Fixed maturities                      $35,630           $34,933
  Equity securities                         937               701
  Mortgage loans                         10,813            10,927
  Real estate                             1,023             1,102
  Other, primarily policy loans           8,370             8,871
  ----------------------------------------------------------------
  Total investment assets               $56,773           $56,534
  ================================================================
  
  Additional information regarding CIGNA's investment assets is included in Note 4
  to the third quarter 1997 Financial  Statements and Notes 2, 4 and 5 to the 1996
  Financial Statements as well as the 1996 Form 10-K.
  
  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:
  
  ================================================================
                                       September 30,   December 31,
                                             1997          1996
  ----------------------------------------------------------------
  Fixed maturities                            29%            28%
  Mortgage loans                              55%            56%
  Real estate                                 62%            58%
  ================================================================
  
  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  September  30,  1997 and  December  31,  1996,  the  fair  value of fixed
  maturities,  including  policyholder  share,  was greater than amortized cost by
  $1.8  billion  and  $1.5  billion,  respectively.  The  increase  in  unrealized
  appreciation  primarily  reflects the downward  movement in interest rates since
  December 31, 1996.
  
        Potential 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 $58 million of potential problem bonds, including amounts attributable
  to policyholder  contracts, as of September 30, 1997, compared with $107 million
  as of December  31,  1996.  These  amounts  are net of $5 million of  cumulative
  write-downs.
  
        Problem Bonds
  
  CIGNA considers bonds that are delinquent or restructured as to terms, typically
  interest  rate and,  in certain  cases,  maturity  date,  problem  bonds.  As of
  September  30, 1997 and December 31, 1996,  CIGNA had problem  bonds,  including
  amounts  attributable  to  policyholder  contracts,  of $177  million  and  $160
  million, net of related cumulative  write-downs of $98 million and $125 million,
  respectively.
  
                                         15
  <PAGE>
        Cumulative Write-Downs for Bonds
  
  CIGNA had cumulative  write-downs for bonds as of September 30, 1997 and 1996 of
  $104  million  and $168  million,  respectively,  including  $30 million and $60
  million attributable to policyholder contracts.  Also, cumulative write-downs as
  of  September  30,  1997  and 1996  included  $1  million  for  bonds no  longer
  classified as problem or potential problem bonds.
  
  During the nine months of 1997 and 1996,  CIGNA  established  write-downs of $43
  million and $44 million,  respectively, for problem and potential problem bonds.
  These amounts included $13 million and $14 million, attributable to policyholder
  contracts, for the nine months of 1997 and 1996,  respectively.  See the Summary
  on page 18 for the  effect  of  write-downs  on  policyholder  contracts  and on
  CIGNA's net income.
  
        Effect of Non-Accruals for Bonds
  
  CIGNA recognizes interest income on problem bonds only when payment is received.
  See the  Summary  on page  18 for  the  effect  of  non-accruals  for  bonds  on
  policyholder contracts and on CIGNA's net income.
  
  Mortgage Loans
  
  ================================================================
                                     September 30,    December 31,
                                         1997             1996
  ----------------------------------------------------------------
  Mortgage loans (in millions)           $10,813          $10,927
  Property type:
     Retail facilities                       42%              43%
     Office buildings                         33               34
     Apartment buildings                      12               12
     Hotels                                    6                6
     Other                                     7                5
  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.
  
  During the nine months of 1997, $706 million of mortgage loans were scheduled to
  mature,  of which $312 million were paid in full,  $132 million were extended at
  existing loan rates for a weighted  average of nine months and $102 million were
  refinanced at current market rates.  Mortgage loan  extensions and  refinancings
  are loans in good standing.  The remaining scheduled  maturities of $160 million
  were problem mortgage loans. The effect of not receiving timely cash payments on
  maturing  mortgage  loans is not expected to have a material  adverse  effect on
  CIGNA's future results of operations, liquidity or financial condition.
  
        Potential 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 $281  million as of September  30,  1997,  and $384
  million as of  December  31,  1996,  net of related  valuation  reserves  of $36
  million and $30 million, respectively.
  
        Problem Mortgage Loans
  
  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. As of September 30, 1997,  restructured mortgage loans
  with a carrying value of $174 million had their original maturity date extended,
  with a weighted  average  extension of  approximately  five years.  Restructured
  mortgage loans generated annualized cash returns averaging  approximately 10% as
  of September 30, 1997.
  
  CIGNA had problem mortgage loans, including amounts attributable to policyholder
  contracts,  of $199 million and $363 million,  net of valuation  reserves of $12
  million and $71  million,  as of  September  30,  1997 and  December  31,  1996,
  respectively.
  
        Valuation Reserves for Mortgage Loans
  
  CIGNA had valuation  reserves for mortgage  loans at September 30, 1997 and 1996
  of $48  million and $95  million,  respectively,  including  $29 million and $62
  million attributable to policyholder contracts.
  
                                         16
  <PAGE>
  
  During the nine months of 1997 and 1996, CIGNA established valuation reserves of
  $23 million and $53 million,  respectively,  for problem and  potential  problem
  mortgage   loans.   These   amounts   included  $11  million  and  $30  million,
  respectively, attributable to policyholder contracts.
  
  See the Summary on page 18 for the effect of valuation  reserves on policyholder
  contracts and on CIGNA's net income.
  
        Effect of Non-Accruals for Mortgage Loans
  
  CIGNA recognizes  interest income on problem mortgage loans only when payment is
  received. See the Summary on page 18 for the effect of non-accruals for mortgage
  loans on policyholder contracts and on CIGNA's net income.
  
  
  
   Real Estate
  
  As of September 30, 1997 and December 31, 1996,  investment real estate,  net of
  reserves  and  write-downs,   included:   1)  $466  million  and  $495  million,
  respectively,  of real  estate  held for the  production  of income  and 2) $557
  million and $607 million,  respectively, of real estate held for sale, primarily
  properties acquired as a result of foreclosure of mortgage loans.
  
        Real Estate Write-downs and Valuation
        Reserves
  
  CIGNA had cumulative  write-downs  and valuation  reserves for real estate as of
  September  30,  1997 and 1996 of $294  million and $391  million,  respectively,
  including $159 million and $197 million attributable to policyholder contracts.
  
  See the Summary on page 18 for the effect of write-downs and valuation  reserves
  on policyholder contracts and on CIGNA's net income.
  
                                         17
  <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>
  ============================================================================================================================
                                 Three Months Ended September 30,                    Nine Months Ended September 30,
                         -------------------------------------------------   -------------------------------------------------
                                  1997                      1996                      1997                      1996
                         -----------------------   -----------------------   ------------------------  -----------------------
                          Policyholder               Policyholder              Policyholder              Policyholder
  (In millions)              Contracts     CIGNA        Contracts    CIGNA        Contracts     CIGNA       Contracts    CIGNA
  ----------------------------------------------------------------------------------------------------------------------------
  <S>                              <C>      <C>             <C>        <C>            <C>        <C>           <C>        <C>
  Write-downs and
  valuation
  reserves:
     Bonds                         $6       $12             $6         $8             $13        $20           $14        $19
     Mortgage loans                 5         3              1          1              11          8            30         14
     Real estate                   (2)       --              1         --              (1)         2            --          1
  ----------------------------------------------------------------------------------------------------------------------------
  Total                            $9       $15             $8         $9             $23        $30           $44        $34
  ============================================================================================================================
  Non-accruals:
     Bonds                         $2        $3             $3         $4              $5         $8            $8        $12
     Mortgage loans                (1)       --              2         --              (2)        --             5          1
  ----------------------------------------------------------------------------------------------------------------------------
  Total                            $1        $3             $5         $4              $3         $8           $13        $13
  ============================================================================================================================
  </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,   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 STATEMENT
  
  Except for historical  information provided in this Management's  Discussion and
  Analysis,  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;  6)  charges in  CIGNA's  health  care  operations
  associated with restructuring activities and the Healthsource  acquisition;  and
  7)  completion  of the  sale  of  its  individual  life  insurance  and  annuity
  businesses.
  
                                         18
  <PAGE>
  
  Part II.  OTHER INFORMATION
  
  Item 6.           Exhibits and Reports on Form 8-K.
  
                    (a)      See Exhibit Index.
  
                    (b)      During the quarterly period ended September 30, 1997,
                             and as of the filing date,  CIGNA filed the following
                             Reports on Form 8-K:
  
                             o        dated July 30,  1997,  Item 5 - containing a
                                      news release  regarding  its second  quarter
                                      1997 results.
  
                             o        dated August 4, 1997,  Item 5 - containing a
                                      news release  regarding  the adoption of the
                                      Shareholder Rights Agreement.
  
                             o        dated October 1, 1997, Item 5 - containing a
                                      news release regarding its preliminary third
                                      quarter 1997 earnings estimates.
  
                             o        dated October 30, 1997,  Item 5 - containing
                                      a news release  regarding  its third quarter
                                      1997 earnings results.
  
                                         19
  
  <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:    November 7, 1997
  
                                         20
  
  <PAGE>
  
                                    Exhibit Index
  
  
                                                             Method of
  Number    Description                                        Filing
  
  3         Restated Certificate of Incorporation          Filed herewith.
            of the Registrant as last amended
            August 4, 1997
  
  11        Computation of Earnings                        Filed herewith.
            Per Share
  
  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.
  
  
                                         21
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 93803}]
metadata_filer: {"company-data": {"conformed-name": "CIGNA CORP", "cik": "0000701221", "assigned-sic": "6331", "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": "97710380"}, "business-address": {"street1": "ONE LIBERTY PL 1650 MARKET ST", "street2": "P O BOX 7716", "city": "PHILADELPHIA", "state": "PA", "zip": "19192-1550", "phone": "2157611000"}}
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 September 30, 1997
  
                                         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, Philadelphia, Pa.     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 September 30, 1997,  74,057,237 shares of the issuer's Common Stock were
  outstanding.
  CIGNA CORPORATION
  
                                        INDEX
  
                                                                     Page No.
  
  PART I. FINANCIAL INFORMATION
  
          Item 1.   Financial Statements
  
                    Consolidated Statements of Income
                     and Retained Earnings                               1
                    Consolidated Balance Sheets                          2
                    Consolidated Statements of Cash Flows                3
                    Notes to Financial Statements                        4
  
          Item 2.   Management's Discussion and
                    Analysis of Financial Condition
                     and Results of Operations                           8
  
  PART II. OTHER INFORMATION
  
          Item 6.   Exhibits and Reports on Form 8-K                    19
  
  SIGNATURE                                                             20
  
  EXHIBIT INDEX                                                         21
  
  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  STATEMENTS  OF  INCOME  AND  RETAINED  EARNINGS
  (In millions, except per share amounts)
  Three Months Ended           Nine Months Ended
                                                    September 30,                 September 30,
                                                  1997          1996          1997         1996
  ==============================================================================================================================
  REVENUES
  Premiums and fees                              $3,925        $3,444       $10,795       $10,333
  Net investment income                           1,057         1,069         3,172         3,263
  Other revenues                                    175           154           498           448
  Realized investment gains                          25            18            81            17
                                               --------      --------      --------      --------
      Total revenues                              5,182         4,685        14,546        14,061
                                               --------      --------      --------      --------
  
  BENEFITS, LOSSES AND EXPENSES
  Benefits, losses and settlement expenses        3,359         3,064         9,433         9,337
  Policy acquisition expenses                       263           283           797           877
  Other operating expenses                        1,133           904         3,041         2,710
                                               --------      --------      --------      --------
      Total benefits, losses and expenses         4,755         4,251        13,271        12,924
                                               --------      --------      --------      --------
  
  INCOME BEFORE INCOME TAXES                        427           434         1,275         1,137
                                               --------      --------      --------      --------
  
  Income taxes:
      Current                                        86           152           320           264
      Deferred                                       62             1           109           123
                                               --------      --------      --------      --------
          Total taxes                               148           153           429           387
                                               --------      --------      --------      --------
  
  NET INCOME                                        279           281           846           750
  Common dividends declared                         (61)          (60)         (184)         (182)
  Retained earnings, beginning of period          5,299         4,388         4,855         4,041
  -----------------------------------------------------------------------------------------------
  
  RETAINED EARNINGS, END OF PERIOD               $5,517        $4,609        $5,517        $4,609
  ------------------------------------------=====================================================
  
  EARNINGS PER SHARE                              $3.72         $3.69        $11.31         $9.80
  ------------------------------------------=====================================================
  
  DIVIDENDS DECLARED PER SHARE                    $0.83         $0.80         $2.49         $2.40
  ------------------------------------------=====================================================
  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
                                                                             September 30,              December 31,
                                                                                1997                     1996
  ================================================================================================================
  ASSETS
  Investments:
     Fixed maturities, at fair value (amortized cost, $33,817; $33,404)    $     35,630             $      34,933
     Equity securities, at fair value (cost, $715; $573)                            937                       701
     Mortgage loans                                                              10,813                    10,927
     Policy loans                                                                 7,252                     7,296
     Real estate                                                                  1,023                     1,102
     Other long-term investments                                                    231                       255
     Short-term investments                                                         887                     1,320
                                                                             -----------              ------------
         Total investments                                                       56,773                    56,534
  Cash and cash equivalents                                                       1,470                     1,287
  Accrued investment income                                                       1,088                       890
  Premiums, accounts and notes receivable                                         4,441                     4,229
  Reinsurance recoverables                                                        6,938                     7,287
  Deferred policy acquisition costs                                               1,291                     1,230
  Property and equipment                                                            868                       802
  Deferred income taxes                                                           1,765                     1,998
  Other assets                                                                      959                       993
  Goodwill and other intangibles                                                  2,545                     1,068
  Separate account assets                                                        28,290                    22,614
  ----------------------------------------------------------------------------------------------------------------
  
          Total assets                                                     $    106,428             $      98,932
  ---------------------------------------------------------------------------=====================================
  
  LIABILITIES
  Contractholder deposit funds                                             $     30,271             $      29,878
  Unpaid claims and claim expenses                                               18,434                    18,841
  Future policy benefits                                                         11,896                    11,784
  Unearned premiums                                                               1,852                     1,940
                                                                             -----------              ------------
           Total insurance and contractholder liabilities                        62,453                    62,443
  Accounts payable, accrued expenses and other liabilities                        5,775                     5,326
  Current income taxes                                                              172                       221
  Short-term debt                                                                   444                       289
  Long-term debt                                                                  1,499                     1,021
  Separate account liabilities                                                   28,094                    22,424
  ----------------------------------------------------------------------------------------------------------------
           Total liabilities                                                     98,437                    91,724
  ----------------------------------------------------------------------------------------------------------------
  
  CONTINGENCIES - NOTE 8
  
  SHAREHOLDERS' EQUITY
  Common stock (shares issued, 88)                                                   88                        88
  Additional paid-in capital                                                      2,631                     2,572
  Net unrealized appreciation, fixed maturities                                     620                       539
  Net unrealized appreciation, equity securities                                    149                        88
  Net translation of foreign currencies                                             (66)                      (45)
  Retained earnings                                                               5,517                     4,855
  Less treasury stock, at cost                                                     (948)                     (889)
  ----------------------------------------------------------------------------------------------------------------
           Total shareholders' equity                                             7,991                     7,208
  ----------------------------------------------------------------------------------------------------------------
  
           Total liabilities and shareholders' equity                      $    106,428             $      98,932
  ---------------------------------------------------------------------------=====================================
  
  SHAREHOLDERS' EQUITY PER SHARE                                           $     107.90             $        97.15
  ---------------------------------------------------------------------------=====================================
  The Notes to Financial Statements are an integral part of these statements.
  
                                          2
  CIGNA  CORPORATION
  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
  (In millions)
  Nine Months Ended September 30,
                                                                                          1997                        1996
  ============================================================================================================================
  CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                                                      $       846                 $       750
      Adjustments to reconcile net income to net cash
          provided by (used in) operating activities:
              Insurance liabilities, net of reinsurance recoverables                          168                        (201)
              Premiums, accounts and notes receivable                                         (99)                        (39)
              Accounts payable, accrued expenses, other liabilities and
                  current income taxes                                                        (26)                       (123)
              Deferred income taxes                                                           109                         123
              Realized investment (gains)                                                     (81)                        (17)
              Gain on sale of businesses and other equity interests                             -                         (18)
              Other, net                                                                     (195)                       (134)
                                                                                        ----------                  ----------
              Net cash provided by operating activities                                       722                         341
                                                                                        ----------                  ----------
  
  CASH FLOWS FROM INVESTING ACTIVITIES
      Proceeds from investments sold:
          Fixed maturities                                                                  4,491                       4,925
          Equity securities                                                                   204                         304
          Mortgage loans                                                                      465                         315
          Other (primarily short-term investments)                                         11,029                       8,871
      Investment maturities and repayments:
          Fixed maturities                                                                  2,588                       2,891
          Mortgage loans                                                                      446                         542
      Investments purchased:
          Fixed maturities                                                                 (7,328)                     (6,879)
          Equity securities                                                                  (347)                       (317)
          Mortgage loans                                                                     (908)                     (1,247)
          Other (primarily short-term investments)                                        (10,111)                     (8,627)
      Net cash from acquisitions and dispositions                                          (1,339)                         66
      Other, net                                                                             (115)                       (106)
                                                                                        ----------                  ----------
          Net cash provided by (used in) investing activities                                (925)                        738
                                                                                        ----------                  ----------
  
  CASH FLOWS FROM FINANCING ACTIVITIES
      Deposits and interest credited to contractholder deposit funds                        5,384                       4,900
      Withdrawals and benefit payments from contractholder deposit funds                   (5,181)                     (4,944)
      Net issuance (repayment) of short-term debt                                             104                         (11)
      Issuance of long-term debt                                                              600                           -
      Repurchase of common stock                                                              (55)                       (161)
      Repayment of long-term debt including current portion                                  (276)                       (158)
      Common dividends paid                                                                  (182)                       (180)
      Other, net                                                                               11                          11
                                                                                        ----------                  ----------
         Net cash provided by (used in) financing activities                                  405                        (543)
                                                                                        ----------                  ----------
  Effect of foreign currency rate changes on cash and cash equivalents                        (19)                         (7)
  ----------------------------------------------------------------------------------------------------------------------------
  Net increase in cash and cash equivalents                                                   183                         529
  Cash and cash equivalents, beginning of period                                            1,287                       1,559
  ----------------------------------------------------------------------------------------------------------------------------
  
  Cash and cash equivalents, end of period                                            $     1,470                 $     2,088
  --------------------------------------------------------------------------------------======================================
  
  Supplemental Disclosure of Cash Information:
      Income taxes paid, net of refunds                                               $       333                 $       194
      Interest paid                                                                   $        82                 $        88
  ----------------------------------------------------------------------------------------------------------------------------
  The Notes to Financial Statements are an integral part of these statements.
  
                                          3
  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 1997
  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.
  
  NOTE 2-NEW ACCOUNTING PRONOUNCEMENT
  
  In 1997, the Financial  Accounting Standards Board issued Statement of Financial
  Accounting  Standards  (SFAS) No. 128,  "Earnings per Share (EPS)." SFAS No. 128
  replaces  primary  EPS with basic EPS,  which is  computed  using only  weighted
  average common shares outstanding  without considering common stock equivalents.
  Diluted EPS under SFAS No. 128 is computed  similarly to fully diluted EPS. SFAS
  No. 128 also requires dual  presentation of basic and diluted EPS on the face of
  the income  statement.  Adoption is required as of December 31,  1997,  at which
  time all prior  periods must be restated.  The effect on CIGNA's EPS of adopting
  SFAS No. 128 is not expected to be material.
  
  NOTE 3-ACQUISITIONS AND DISPOSITIONS
  
  At the end of the second quarter of 1997, CIGNA acquired the outstanding  common
  stock of Healthsource, Inc. (Healthsource). The cost of the acquisition was $1.7
  billion, reflecting the purchase of Healthsource's common stock for $1.4 billion
  in June 1997 and the  retirement  of  Healthsource  debt of  approximately  $250
  million in the third  quarter of 1997.  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.  Intangible
  assets and goodwill of $1.5 billion are being amortized on a straight-line basis
  over periods ranging from eight to 40 years.
  
  In the fourth  quarter of 1997,  CIGNA  expects  to 1)  complete  its fair value
  analysis  of  Healthsource's  net  assets;  2)  finalize  plans for  integrating
  Healthsource  with CIGNA and 3) finalize plans for restructuring its health care
  operations.  The effect on net income from these  initiatives  is not reasonably
  estimable  at this time;  however,  the charge is not  expected  to exceed  $125
  million after-tax.
  
  Healthsource's  total  revenues  were $971  million and $1.7 billion for the six
  months  ended June 30,  1997 and for the full year 1996,  respectively.  The pro
  forma effect on CIGNA's net income was not material.
  
  In July 1997,  CIGNA  entered  into an  agreement  to sell its  individual  life
  insurance and annuity businesses, which are included in the Individual Financial
  Services  segment,  for  cash  proceeds  of $1.4  billion.  Revenues  for  these
  businesses  were $230  million and $703  million for the third  quarter and nine
  months of 1997,  respectively,  compared  with $227 million and $671 million for
  the same periods  last year.  Net income was $24 million and $72 million for the
  third quarter and nine months of 1997,  respectively,  compared with $21 million
  and $45 million for the same periods of 1996.
  
                                          4
  Completion  of the sale,  which is  anticipated  to occur by the end of 1997, is
  subject to  regulatory  approvals.  The  agreement to sell these  businesses  is
  generally in the form of an indemnity reinsurance  arrangement,  and is expected
  to result in an after-tax  gain on the sale of  approximately  $700  million.  A
  significant  portion of the gain will be  deferred  and  amortized  over  future
  periods.  Proceeds  from the sale are expected to be used for  internal  growth,
  acquisitions,  and share repurchases,  with share repurchases being the expected
  use in the near term.
  
  CIGNA had other acquisitions and dispositions during the nine months of 1997 and
  1996, 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           Nine Months
                                   Ended                  Ended
                               September 30,          September 30,
  (In millions)              1997        1996        1997       1996
  ---------------------------------------------------------------------
  Realized investment 
  gains (losses):
       Fixed maturities           $6           $3        $35        $--
       Equity securities          19            4         33         13
       Mortgage loans             (3)          --        (17)       (20)
       Real estate                 3            6         20          7
       Other                      --            5         10         17
                           ---------  ----------- ----------  ---------
                                  25           18         81         17
  Less income taxes                8            7         27          8
  ---------------------------------------------------------------------
  Net realized investment
  gains                          $17          $11        $54         $9
  =====================================================================
  
  Fixed Maturities and Equity Securities
  
  Sales of  available-for-sale  fixed maturities and equity securities, including
  policyholder share, were as follows:
  
  ---------------------------------------------------------------------
                                Three Months           Nine Months
                                   Ended                  Ended
                               September 30,          September 30,
  (In millions)              1997        1996        1997       1996
  ---------------------------------------------------------------------
  
  Proceeds from sales      $1,417       $1,544     $4,695     $5,209
  Gross gains on sales         55           46        141        140
  Gross losses on sales       (10)         (40)       (70)      (120)
  ---------------------------------------------------------------------
  
  Net unrealized appreciation for investments carried at fair value is included as
  a  separate  component  of  Shareholders'  Equity,  net of  policyholder-related
  amounts and deferred  income taxes.  The net unrealized  appreciation  for these
  investments,  primarily  fixed  maturities,  during the third  quarter  and nine
  months  of 1997  increased  by $200  million  and  $142  million,  respectively,
  compared  with an increase of $2 million and a decrease of $565  million for the
  same periods last year.
  
  NOTE 5-EARNINGS PER SHARE
  
  Earnings per share were based on net income  divided by weighted  average common
  shares, including common share equivalents, as follows:
  
  ---------------------------------------------------------------------
                                Three Months           Nine Months
                                   Ended                  Ended
                               September 30,          September 30,
  (In thousands)             1997        1996        1997       1996
  ---------------------------------------------------------------------
  Weighted average
  common shares               75,041       76,055     74,791     76,585
  ---------------------------------------------------------------------
  
  There is no significant difference between earnings per share on a primary and a
  fully diluted basis.
  
  Common  shares held as Treasury  shares were  13,841,468  and  12,390,283  as of
  September 30, 1997 and 1996, respectively.
  
  NOTE 6-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 1990, 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 in connection with this issue. The decision did not have an effect
  on results of operations,  as adequate reserves had been previously established.
  As a result of this ruling,  CIGNA made payments of  approximately  $100 million
  prior to September 30, 1997 and an additional $150 million in the fourth quarter
  of 1997.  CIGNA plans to appeal the U.S. Tax Court decision to the U.S. Court of
  Appeals.
  
  As of September 30, 1997, CIGNA had no tax basis operating loss carryforwards.
  
                                          5
  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 $719 million and
  $711 million as of September 30, 1997 and December 31, 1996, respectively. While
  future charges for  unrecoverable  reinsurance may materially  affect results of
  operations in future  periods,  such amounts are not expected to have a material
  adverse effect on CIGNA's liquidity or financial condition.
  
  For the third  quarter  and nine months of 1997,  premiums  and fees were net of
  ceded  premiums of $448 million and $1.5  billion,  respectively.  For the third
  quarter and nine months of 1996, premiums and fees were net of ceded premiums of
  $619 million and $1.6 billion,  respectively.  In addition, benefits, losses and
  settlement  expenses  for the third  quarter and nine months of 1997 were net of
  reinsurance recoveries of $376 million and $1.1 billion, respectively. Benefits,
  losses and  settlement  expenses  for the third  quarter and nine months of 1996
  were  net  of   reinsurance   recoveries  of  $410  million  and  $1.2  billion,
  respectively.
  
  NOTE 8-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.
  
  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   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   reform health care.
  
  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. CIGNA does not expect this legislation to have a
  material  effect  on  its  consolidated  results  of  operations,  liquidity  or
  financial condition.
  
  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.
  
  Various federal and state  proposals have been made to place  limitations on the
  formation and operation of efficient health care networks.  Due to uncertainties
  associated  with the timing and  content of any  health  care  legislation,  the
  effect on CIGNA's future results of operations, liquidity or financial condition
  cannot be reasonably estimated at this time.
  
  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.
  
                                          6
  The NAIC is currently developing  standardized  statutory accounting principles,
  which are scheduled to take effect in 1999. The effect on CIGNA's  statutory net
  income, surplus and liquidity cannot be reasonably estimated at this time.
  
  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.
  
  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.
  
                                          7
  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  September  30, 1997,  compared  with  December 31, 1996,  and its
  results of operations for the quarter and nine months ended  September 30, 1997,
  compared  with the same periods  last year.  This  discussion  should be read in
  conjunction with  Management's  Discussion and Analysis included in CIGNA's 1996
  Annual Report to Shareholders (pages 8 through 21) and in CIGNA's report on Form
  10-Q for the first and second  quarters of 1997, 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.
  
  At the end of the second quarter of 1997, CIGNA acquired the outstanding  common
  stock of Healthsource, Inc. (Healthsource). The cost of the acquisition was $1.7
  billion, reflecting the purchase of Healthsource's common stock for $1.4 billion
  in June 1997 and the  retirement  of  Healthsource  debt of  approximately  $250
  million in the third  quarter of 1997.  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.  Intangible
  assets and goodwill of $1.5 billion are being amortized on a straight-line basis
  over periods ranging from eight to 40 years.
  
  In the fourth  quarter of 1997,  CIGNA  expects  to 1)  complete  its fair value
  analysis  of  Healthsource's  net  assets;  2)  finalize  plans for  integrating
  Healthsource  with CIGNA and 3) finalize plans for restructuring its health care
  operations.  The effect on net income from these  initiatives  is not reasonably
  estimable  at this time;  however,  the charge is not  expected  to exceed  $125
  million after-tax.
  
  Healthsource's  total  revenues  were $971  million and $1.7 billion for the six
  months  ended June 30,  1997 and for the full year 1996,  respectively.  The pro
  forma effect on CIGNA's net income was not material.
  
  In July 1997,  CIGNA  entered  into an  agreement  to sell its  individual  life
  insurance  and  annuity  businesses  for cash  proceeds of $1.4  billion.  These
  businesses,  which are included in the Individual  Financial  Services  segment,
  reported the following results:
  
    ==============================================================
                             Three Months Ended  Nine Months Ended
                                September 30,       September 30,
   (In millions)               1997      1996      1997     1996
    --------------------------------------------------------------
    Revenues                    $230      $227      $703     $671
    Operating income *           $26       $21       $70      $45
    Net income                   $24       $21       $72      $45
    ==============================================================
  
  Completion  of the sale,  which is  anticipated  to occur by the end of 1997, is
  subject to  regulatory  approvals.  The  agreement to sell these  businesses  is
  generally in the form of an indemnity reinsurance  arrangement,  and is expected
  to result in an after-tax  gain on the sale of  approximately  $700  million.  A
  significant  portion of the gain will be  deferred  and  amortized  over  future
  periods.  Proceeds  from the sale are expected to be used for  internal  growth,
  acquisitions,  and share repurchases,  with share repurchases being the expected
  use in the near term.
  
  CIGNA continues to conduct  strategic and financial reviews of its businesses in
  order to deploy its capital most effectively.
  
  CIGNA is currently  analyzing and modifying or replacing its information systems
  to ensure that they are capable of processing  information for the Year 2000 and
  beyond. The costs of these efforts are not expected to have a material effect on
  CIGNA's results of operations. In addition, CIGNA has relationships with various
  third party  entities in its  ordinary  course of business.  Where  practicable,
  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 are not expected to be material, however, litigation costs to defend
  or deny such claims are not reasonably  estimable at this time.
  
  ___________________________________
  * Operating  income (loss) is defined as net income (loss)  excluding  after-tax
    realized investment results.
  
                                         8
  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 1990, 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 in connection with this issue. The decision did not have an effect
  on results of operations,  as adequate reserves had been previously established.
  As a result of this ruling,  CIGNA made payments of  approximately  $100 million
  prior to September 30, 1997 and an additional $150 million in the fourth quarter
  of 1997.  CIGNA plans to appeal the U.S. Tax Court decision to the U.S. Court of
  Appeals.
  
  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    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    reform health care.
  
  The eventual  effect on CIGNA of the changing  environment  in which it operates
  remains  uncertain.  For  additional  information,  see Note 8 to the  Financial
  Statements.
  
  CONSOLIDATED RESULTS OF OPERATIONS
  
  ================================================================
  FINANCIAL SUMMARY          Three Months Ended  Nine Months Ended
                                September 30,      September 30,
  (In millions)                 1997     1996      1997      1996
  ----------------------------------------------------------------
  Premiums and fees           $3,925   $3,444   $10,795   $10,333
  Net investment income        1,057    1,069     3,172     3,263
  Other revenues                 175      154       498       448
  Realized investment
  gains                           25       18        81        17
                          ----------------------------------------
  Total revenues               5,182    4,685    14,546    14,061
  Benefits and expenses        4,755    4,251    13,271    12,924
                          ----------------------------------------
  Income before taxes            427      434     1,275     1,137
  Income taxes                   148      153       429       387
                          ----------------------------------------
  Net income                    $279     $281      $846      $750
  ------------------------========================================
  Realized investment
  gains, net of taxes            $17      $11       $54        $9
  ------------------------========================================
  
  CIGNA's 1997  consolidated  net income  decreased  1% for the third  quarter and
  increased  13% for the nine  months,  compared  with the same periods last year.
  Operating  income for the third quarter and nine months of 1997 was $262 million
  and $792  million,  respectively,  compared  with $270 million and $741 million,
  respectively,  for the same periods last year. The decrease in operating  income
  for the third  quarter  reflects  increased  losses in Other  Operations,  which
  include  the  financing  costs  associated  with the  Healthsource  acquisition.
  Improvements in all of the business  segments  partially  offset these increased
  losses.  For  the  nine  months,   operating  income  increased  7%,  reflecting
  improvement  in all of the  business  segments,  partially  offset by  increased
  losses in Other Operations.
  
  After-tax  realized  investment  results improved for the third quarter and nine
  months of 1997 from the same  periods last year.  Results for the third  quarter
  primarily  reflect  higher  gains  on  sales  of  equity  securities  and  fixed
  maturities, partially offset by higher impairment losses on fixed maturities and
  mortgage  loans.  Results for the nine months  reflect  higher gains on sales of
  fixed  maturities,  equity  securities and real estate as well as lower mortgage
  loan impairment losses. For additional information,  see Note 4 to the Financial
  Statements.
  
  Full year operating  income for 1997 is expected to improve over 1996.  However,
  such  improvement  could  be  adversely  affected  by the  factors  noted in the
  cautionary statement on page 18.
  
                                         9
  EMPLOYEE LIFE AND HEALTH BENEFITS
  
  ================================================================
  FINANCIAL SUMMARY          Three Months Ended  Nine Months Ended
                                September 30,       September 30,
  (In millions)                1997      1996     1997      1996
  ----------------------------------------------------------------
  Premiums and fees           $2,572    $2,036   $6,792    $6,188
  Net investment income          142       136      415       423
  Other revenues                 116        99      340       301
  Realized investment
  gains (losses)                  (6)         4        1       (5)
                          ----------------------------------------
  Total revenues               2,824     2,275    7,548     6,907
  Benefits and expenses        2,629     2,071    6,981     6,362
                          ----------------------------------------
  Income before taxes            195       204      567       545
  Income taxes                    71        74      194       188
                          ----------------------------------------
  Net income                    $124      $130     $373      $357
  ------------------------========================================
  Realized investment
  gains (losses), net of
  taxes                          ($4)        $3       $2      ($3)
  ------------------------========================================
  
  Net income for the Employee Life and Health  Benefits  segment  decreased 5% for
  the third  quarter and  increased 4% for the nine months of 1997,  compared with
  the same periods last year.
  
  Operating income for the Indemnity and HMO operations was as follows:
  
  ================================================================
                             Three Months Ended   Nine Months Ended
                                September 30,       September 30,
  (In millions)                1997       1996     1997      1996
  ----------------------------------------------------------------
  Indemnity operations          $76        $73     $202      $198
  HMO operations                 52         54      169       162
  ----------------------------------------------------------------
  Total                        $128       $127     $371      $360
  ================================================================
  
  Indemnity  operating  income  increased 4% and 2% for the third quarter and nine
  months of 1997,  respectively,  compared with the same periods last year.  Third
  quarter 1996 results  reflect the  unfavorable  after-tax  effects of $7 million
  from reserve  reviews.  Excluding this item,  operating income for 1997 declined
  5%. This decline reflects  unfavorable  long-term  disability claim  experience,
  partially  offset by improved  results from guaranteed cost medical business and
  earnings from Healthsource  operations.  Results for the nine months of 1997 and
  1996 include  unfavorable  after-tax  adjustments  of $3 million and $9 million,
  respectively,  from reserve reviews.  Excluding these items,  earnings were $205
  million and $207 million for the nine months ended  September 30, 1997 and 1996,
  respectively.  This decrease reflects higher operating expenses primarily due to
  customer service  initiatives,  and lower investment income resulting from lower
  average assets and yields, partially offset by improved claim experience.
  
  HMO  results  for  the  third  quarter  of  1996  include  favorable   after-tax
  adjustments of $7 million from reserve  reviews.  Results for the nine months of
  1997 and 1996 include  favorable  after-tax  adjustments  of $13 million and $12
  million,  respectively,  from  reserve  reviews and the nine months of 1996 also
  include  a  first  quarter  after-tax  gain  of $8  million  from  the  sale  of
  subsidiaries.  Excluding  these items,  HMO  earnings  were $52 million and $156
  million for the third  quarter and nine months of 1997,  respectively,  compared
  with $47 million and $142 million, respectively, for the same periods last year.
  These  higher  earnings  are due to improved  results in the dental  operations,
  primarily  reflecting  rate  increases,  cost controls,  and membership  growth.
  Results in 1997 for the medical HMOs were about level with the same periods last
  year,  reflecting  rate  increases and membership  growth,  offset by higher HMO
  medical costs,  higher  operating  expenses  associated with growth and customer
  service initiatives, and Healthsource losses after goodwill.
  
  Premiums and fees increased 26% and 10% for the third quarter and nine months of
  1997, respectively, compared to the same periods last year, primarily reflecting
  the addition of  Healthsource.  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 4% for the third  quarter of 1997 compared to
  1996 primarily due to the addition of assets related to Healthsource,  partially
  offset by lower yields.  The 2% decrease for the nine months of 1997 compared to
  1996 is primarily a result of lower yields,  partially offset by the addition of
  assets related to Healthsource.
  
  Total HMO  membership  increased  36%  since  September  30,  1996 and 35% since
  December 31, 1996.  Healthsource  accounts for 78% and 79%, of these  increases,
  respectively.  The remaining  increases  primarily reflect  membership growth in
  CIGNA's HMO alternative  funding programs.  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 third quarter and nine months of 1997 were
  
                                         10
  approximately  $3.0  billion  and  $7.8  billion,  respectively.  These  amounts
  represent  an  increase  of 29% and 9%,  respectively,  compared  with  the same
  periods last year primarily  reflecting  Healthsource.  Excluding  Healthsource,
  premium equivalents for alternative funding programs were about level with 1996,
  reflecting  growth in HMOs offset by  cancellations  and  conversions of medical
  indemnity business to HMOs.  Premium  equivalents are expected to continue to be
  constrained  by  competitive  pressures  in both the medical  indemnity  and HMO
  markets.
  
  Premium  equivalents  were 54% of total adjusted  premiums and fees for the nine
  months of 1997 and 1996.  Administrative Services Only (ASO) plans accounted for
  50% and 48% of total adjusted  premiums and fees for the nine months of 1997 and
  1996, respectively.
  
  EMPLOYEE RETIREMENT AND SAVINGS BENEFITS
  
  ================================================================
  FINANCIAL SUMMARY          Three Months Ended  Nine Months Ended
                                September 30,       September 30,
  (In millions)                1997       1996     1997      1996
  ----------------------------------------------------------------
  Premiums and fees             $40        $55     $138      $143
  Net investment income         393        419    1,192     1,278
  Realized investment
  gains (losses)                 (3)         9       11        19
                          ----------------------------------------
  Total revenues                430        483    1,341     1,440
  Benefits and expenses         355        398    1,095     1,204
                          ----------------------------------------
  Income before taxes            75         85      246       236
  Income taxes                   24         28       79        78
                          ----------------------------------------
  Net income                    $51        $57     $167      $158
  ------------------------========================================
  Realized investment
  gains (losses), net of
  taxes                         ($2)        $5       $7       $11
  ------------------------========================================
  
  Net income for the Employee  Retirement and Savings Benefits  segment  decreased
  11%  and   increased  6%  for  the  third  quarter  and  nine  months  of  1997,
  respectively,  compared  with the same  periods  of 1996.  Results  for the nine
  months of 1996 include an after-tax charge of $8 million for state guaranty fund
  assessments.  Excluding the above charge,  operating  income was $53 million and
  $160  million  for the third  quarter  and nine  months  of 1997,  respectively,
  compared with $52 million and $155 million,  respectively,  for the same periods
  last year. These increases reflect higher earnings from an increased asset base,
  partially  offset by a shift to lower margin products  (separate  account equity
  funds) and higher operating expenses related to growth initiatives.
  
  Premiums and fees  decreased 27% and 3% for the third quarter and nine months of
  1997,  respectively,  reflecting lower annuity sales, partially offset by higher
  fees from separate accounts.
  
  Net investment  income decreased 6% and 7% for the third quarter and nine months
  of 1997, respectively, compared with the same periods last year. 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 nine months ended  September 30, assets under  management  and
  related activity,  including amounts attributable to separate accounts,  were as
  follows:
  
  ================================================================
  (In millions)                                1997         1996
  ----------------------------------------------------------------
  Balance -- January 1                       $40,587      $38,183
  Premiums and deposits                        5,207        4,478
  Investment results                           1,846        1,977
  Increase (decrease) in fair value of         2,946        (421)
  assets
  Customer withdrawals                        (1,679)      (1,596)
  Other, including participant    
  withdrawals and benefit payments            (3,494)      (3,542)
  ----------------------------------------------------------------
  Balance -- September 30                    $45,413      $39,079
  ================================================================
  
  Premiums and deposits  increased  16% in the nine months of 1997,  compared with
  the same period in 1996. Of this  increase,  approximately  57% reflects  higher
  recurring   deposits  from  existing  customers  while  the  remaining  increase
  represents sales to new customers.  Sales to new customers and new plan sales to
  existing  customers were approximately 47% of premiums and deposits for the nine
  months of 1997 and 1996.  The  decrease in  investment  results  reflects  lower
  capital  gains in 1997  compared  with 1996 and  lower  investment  yields.  The
  increase  for  1997  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 in fixed maturities in the general account.
  
  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.
  
                                         11
  INDIVIDUAL FINANCIAL SERVICES
  
  ================================================================
  FINANCIAL SUMMARY          Three Months Ended  Nine Months Ended
                                 September 30,      September 30,
  (In millions)                 1997      1996     1997      1996
  ----------------------------------------------------------------
  Premiums and fees             $248      $233     $731      $678
  Net investment income          274       257      805       780
  Other revenues                  17        20       46        58
  Realized investment
  gains (losses)                  (4)       --        7        --
                          ----------------------------------------
  Total revenues                 535       510    1,589     1,516
  Benefits and expenses          460       438    1,357     1,330
                          ----------------------------------------
  Income before taxes             75        72      232       186
  Income taxes                    26        25       81        65
                          ----------------------------------------
  Net income                     $49       $47     $151      $121
  ------------------------========================================
  Realized investment
  gains (losses), net of
  taxes                          ($2)      $--       $5       $--
  ------------------------========================================
  
  Net income for the Individual  Financial  Services segment  increased 4% and 25%
  for the third quarter and nine months of 1997,  respectively,  compared with the
  same periods last year. Results for the third quarter and nine months include an
  after-tax  benefit of $4 million for both periods in 1997 and for 1996 after-tax
  benefits of $5 million and $2 million,  respectively,  from  reserve and account
  reviews.  Excluding  these  items,  operating  income was $47  million  and $142
  million for the third  quarter and nine months of 1997,  respectively,  compared
  with $42 million and $119 million, respectively, for the same periods last year.
  These increases primarily reflect favorable mortality and business growth, which
  for the nine months  were  partially  offset by lower  earnings  from  leveraged
  corporate-owned life insurance (COLI).
  
  For the third  quarter and nine months of 1997,  premiums and fees  increased 6%
  and 8%,  respectively,  compared with the same periods of 1996.  These increases
  primarily reflect growth in reinsurance and interest  sensitive  products.  This
  growth was partially offset by lower COLI renewal premiums.
  
  Net investment  income increased 7% and 3% for the third quarter and nine months
  of 1997,  respectively.  These increases  primarily  reflect asset growth in the
  non-leveraged corporate-owned life insurance and annuity businesses.
  
  In 1996,  Congress passed  legislation that phases out over a three-year  period
  the tax  deductibility of policy loan interest for most leveraged COLI products.
  Revenues of $432 million and operating income of $31 million for the nine months
  of 1997 were from leveraged COLI products that are affected by this legislation.
  CIGNA  does  not  expect  this  legislation  to have a  material  effect  on its
  consolidated results of operations, liquidity or financial condition.
  
  A significant  portion of this  segment's  businesses are expected to be sold by
  the end of 1997. See page 8 for further discussion.
  
  PROPERTY AND CASUALTY
  
  ================================================================
  FINANCIAL SUMMARY          Three Months Ended  Nine Months Ended
                                 September 30,       September 30,
  (In millions)                 1997      1996      1997     1996
  ----------------------------------------------------------------
  Premiums and fees           $1,065    $1,120    $3,134   $3,324
  Net investment income          190       201       574      606
  Other revenues                  72        63       209      176
  Realized investment
  gains                           35         2        59        2
                          ----------------------------------------
  Total revenues               1,362     1,386     3,976    4,108
  Benefits and expenses        1,241     1,301     3,669    3,880
                          ----------------------------------------
  Income before taxes            121        85       307      228
  Income taxes                    39        26        94       68
                          ----------------------------------------
  Net income                     $82       $59      $213     $160
  ------------------------========================================
  Realized investment
  gains, net of taxes            $23        $1       $38       $1
  ------------------------========================================
  
  Net income for the Property and Casualty  segment  increased 39% and 33% for the
  third  quarter and nine  months of 1997,  respectively,  compared  with the same
  periods last year.
  
  Operating  income  increased 2% and 10% for the third quarter and nine months of
  1997, respectively, compared with the same periods in 1996. Operating income for
  the ongoing and run-off operations was as follows:
  
  ================================================================
                             Three Months Ended  Nine Months Ended
                                September 30,       September 30,
  (In millions)                1997      1996      1997      1996
  ----------------------------------------------------------------
  Ongoing operations:
    International               $33       $37      $102      $102
  
    Domestic                     26        20        72        52
                         -----------------------------------------
      Total ongoing              59        57       174       154
        operations
  Run-off operations             --         1         1         5
  ----------------------------------------------------------------
      Total                     $59       $58      $175      $159
  ================================================================
  
  International results for the nine months of 1997 include a $6 million after-tax
  charge  for cost  reduction  initiatives,  primarily  severance.  For the  third
  quarter and nine months of 1996,  International  results  include $4 million for
  favorable prior year 
  
                                         12
  development  and, for the quarter,  $3 million for  improved  claim  experience.
  Excluding these items, operating income for the third quarter and nine months of
  1997 was $33 million and $108 million,  respectively,  compared with $30 million
  and $98 million,  respectively,  for the same periods last year. These increases
  are primarily  attributable to improved  international  life insurance  results.
  Improvement  in  Domestic  operations'  results  for the third  quarter and nine
  months primarily reflects lower catastrophes, partially offset by lower premiums
  and fees in 1997. Results for International and Domestic  operations continue to
  reflect a highly competitive pricing environment.
  
  Premiums  and fees  declined  5% and 6% in the third  quarter and nine months of
  1997,  respectively,  compared with the same periods last year.  These  declines
  primarily  reflect  strict   underwriting   standards,   continued   competition
  (particularly in domestic  casualty,  large risk property and commercial package
  lines of business),  and an unfavorable effect from foreign currency translation
  (approximately $25 million and $95 million, respectively).  Strong growth in the
  international  accident  and health  line of  business  partially  offset  these
  declines.
  
  Domestic  operations  had  pre-tax  catastrophe  losses  of $2  million  and $16
  million,  net of  reinsurance,  for the third  quarter  and nine months of 1997,
  respectively,  compared with $27 million and $58 million,  respectively, for the
  same periods of 1996.  Catastrophe  losses for the third quarter and nine months
  of 1996 include $20 million for Hurricane Fran.  Catastrophe losses for the nine
  months of 1996 include $21 million for East Coast winter storms.  The effects of
  reinsurance on catastrophe  losses for the periods  presented were not material.
  International operations had no catastrophe losses in the third quarter and nine
  months of 1997 and 1996.
  
  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.
  
  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 1996 Form 10-K.
  
  CIGNA's  property and casualty  loss reserves of $16.0 billion and $16.5 billion
  as of September 30, 1997 and December 31, 1996, 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  refines its loss estimation process by improving the 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
  
                                         13
  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  $6.4  billion  and $6.8
  billion as of September  30, 1997 and December  31, 1996,  respectively,  net of
  allowances  for  unrecoverable  reinsurance  of $719  million and $711  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 nine months ended September
  30:
  
  ================================================================
                              Three Months Ended  Nine Months Ended
                                 September 30,      September 30,
  (In millions)                 1997      1996      1997     1996
  ----------------------------------------------------------------
  By business operation:
    Ongoing operations            $8       ($2)      $22      $15
    Run-off operations            50        38       150      110
  ================================================================
  Total                          $58       $36      $172     $125
  ================================================================
  By type of loss:
    Asbestos-related             $20       $13       $68      $27
    Environmental
       pollution                   8         5        22       31
    Unrecoverable
       reinsurance                 6         2        15       20
    Workers' compensation         18        17        36       36
    Other                          6        (1)       31       11
  ================================================================
  Total                          $58       $36      $172     $125
  ================================================================
  
  Other prior year  development  for the third quarter and nine months of 1997 was
  primarily attributable to assumed reinsurance and long-term exposures.
  
  OTHER OPERATIONS
  
  Other Operations  includes  unallocated  investment income,  expenses (including
  debt service and new business  initiatives),  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.
  
   Other  Operations  had net losses of $27  million and $58 million for the third
  quarter and nine months of 1997,  respectively,  compared with net losses of $12
  million and $46 million,  respectively, for the same periods in 1996. Net losses
  included after-tax realized investment gains of $2 million for the third quarter
  and nine  months of 1997 and the third  quarter of 1996.  There were no realized
  investment  gains or losses for the nine months of 1996.  The increase in losses
  primarily reflects financing costs associated with the Healthsource  acquisition
  and 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 nine months of 1997,  cash and cash  equivalents  increased $183 million
  from $1.3 billion as of December 31, 1996. The increase  primarily reflects cash
  provided by operating activities ($722 million),  due to earnings and the timing
  of  operating  cash  receipts  and  disbursements;  proceeds on the  issuance of
  long-term  debt  ($600  million)  and net  proceeds  on  short-term  debt  ($104
  million).  These  increases  were  partially  offset by cash  used in  investing
  activities  ($925  million,  which  includes  the $1.3  billion  acquisition  of
  Healthsource   partially   offset  by  net  investment   sales);   repayment  of
  Healthsource debt  (approximately $250 million) and payments of dividends on and
  repurchases of CIGNA common stock ($237  million).  For  additional  information
  regarding the funding of the Healthsource acquisition, see page 8.
  
  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 $1.5  billion of long-term  debt  outstanding  at September  30, 1997,
  compared  with $1.02  billion at December  31,  1996.  This  increase
  
                                         14
  primarily  reflects issuance in May 1997 of $300 million of 7.4% unsecured Notes
  due in 2007 and $300 million of 7.875%  unsecured  Debentures  due in 2027.  The
  proceeds from these issues were used to finance the acquisition of Healthsource.
  As of  September  30,  1997,  CIGNA  had $200  million  remaining  under a shelf
  registration statement that may be issued as debt or equity securities, or both,
  depending upon market conditions and CIGNA's capital requirements.
  
  At September 30, 1997,  CIGNA's  short-term  debt  amounted to $444 million,  an
  increase of $155 million from December 31, 1996. The increase primarily reflects
  higher  borrowings  to fund  working  capital  needs  arising as a result of the
  redemption of the Healthsource debt in the third quarter of 1997.
  
  In October 1997,  Standard and Poor's raised its ratings on CIGNA's  senior debt
  to A from A-, and on CIGNA's commercial paper to A-1 from A-2.
  
  In October 1997, CIGNA's Board of Directors  increased CIGNA's  authorization to
  repurchase its common stock by $500 million.  Stock  repurchases  will depend on
  prevailing market conditions and alternative uses of capital. During 1997, CIGNA
  has  repurchased  927,000  shares for $149  million,  including  587,000  shares
  repurchased  for $100  million  from  October 1 through  November  5, 1997.  The
  remaining authorization as of November 5, 1997 is $552 million.
  
  INVESTMENT ASSETS
  ================================================================
                                     September 30,     December 31,
  (In millions)                          1997              1996
  ----------------------------------------------------------------
  Fixed maturities                      $35,630           $34,933
  Equity securities                         937               701
  Mortgage loans                         10,813            10,927
  Real estate                             1,023             1,102
  Other, primarily policy loans           8,370             8,871
  ----------------------------------------------------------------
  Total investment assets               $56,773           $56,534
  ================================================================
  
  Additional information regarding CIGNA's investment assets is included in Note 4
  to the third quarter 1997 Financial  Statements and Notes 2, 4 and 5 to the 1996
  Financial Statements as well as the 1996 Form 10-K.
  
  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:
  
  ================================================================
                                       September 30,   December 31,
                                             1997          1996
  ----------------------------------------------------------------
  Fixed maturities                            29%            28%
  Mortgage loans                              55%            56%
  Real estate                                 62%            58%
  ================================================================
  
  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  September  30,  1997 and  December  31,  1996,  the  fair  value of fixed
  maturities,  including  policyholder  share,  was greater than amortized cost by
  $1.8  billion  and  $1.5  billion,  respectively.  The  increase  in  unrealized
  appreciation  primarily  reflects the downward  movement in interest rates since
  December 31, 1996.
  
        Potential 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 $58 million of potential problem bonds, including amounts attributable
  to policyholder  contracts, as of September 30, 1997, compared with $107 million
  as of December  31,  1996.  These  amounts  are net of $5 million of  cumulative
  write-downs.
  
        Problem Bonds
  
  CIGNA considers bonds that are delinquent or restructured as to terms, typically
  interest  rate and,  in certain  cases,  maturity  date,  problem  bonds.  As of
  September  30, 1997 and December 31, 1996,  CIGNA had problem  bonds,  including
  amounts  attributable  to  policyholder  contracts,  of $177  million  and  $160
  million, net of related cumulative  write-downs of $98 million and $125 million,
  respectively.
  
                                         15
  Cumulative Write-Downs for Bonds
  
  CIGNA had cumulative  write-downs for bonds as of September 30, 1997 and 1996 of
  $104  million  and $168  million,  respectively,  including  $30 million and $60
  million attributable to policyholder contracts.  Also, cumulative write-downs as
  of  September  30,  1997  and 1996  included  $1  million  for  bonds no  longer
  classified as problem or potential problem bonds.
  
  During the nine months of 1997 and 1996,  CIGNA  established  write-downs of $43
  million and $44 million,  respectively, for problem and potential problem bonds.
  These amounts included $13 million and $14 million, attributable to policyholder
  contracts, for the nine months of 1997 and 1996,  respectively.  See the Summary
  on page 18 for the  effect  of  write-downs  on  policyholder  contracts  and on
  CIGNA's net income.
  
        Effect of Non-Accruals for Bonds
  
  CIGNA recognizes interest income on problem bonds only when payment is received.
  See the  Summary  on page  18 for  the  effect  of  non-accruals  for  bonds  on
  policyholder contracts and on CIGNA's net income.
  
  Mortgage Loans
  
  ================================================================
                                     September 30,    December 31,
                                         1997             1996
  ----------------------------------------------------------------
  Mortgage loans (in millions)           $10,813          $10,927
  Property type:
     Retail facilities                       42%              43%
     Office buildings                         33               34
     Apartment buildings                      12               12
     Hotels                                    6                6
     Other                                     7                5
  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.
  
  During the nine months of 1997, $706 million of mortgage loans were scheduled to
  mature,  of which $312 million were paid in full,  $132 million were extended at
  existing loan rates for a weighted  average of nine months and $102 million were
  refinanced at current market rates.  Mortgage loan  extensions and  refinancings
  are loans in good standing.  The remaining scheduled  maturities of $160 million
  were problem mortgage loans. The effect of not receiving timely cash payments on
  maturing  mortgage  loans is not expected to have a material  adverse  effect on
  CIGNA's future results of operations, liquidity or financial condition.
  
        Potential 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 $281  million as of September  30,  1997,  and $384
  million as of  December  31,  1996,  net of related  valuation  reserves  of $36
  million and $30 million, respectively.
  
        Problem Mortgage Loans
  
  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. As of September 30, 1997,  restructured mortgage loans
  with a carrying value of $174 million had their original maturity date extended,
  with a weighted  average  extension of  approximately  five years.  Restructured
  mortgage loans generated annualized cash returns averaging  approximately 10% as
  of September 30, 1997.
  
  CIGNA had problem mortgage loans, including amounts attributable to policyholder
  contracts,  of $199 million and $363 million,  net of valuation  reserves of $12
  million and $71  million,  as of  September  30,  1997 and  December  31,  1996,
  respectively.
  
        Valuation Reserves for Mortgage Loans
  
  CIGNA had valuation  reserves for mortgage  loans at September 30, 1997 and 1996
  of $48  million and $95  million,  respectively,  including  $29 million and $62
  million attributable to policyholder contracts.
  
                                         16
  During the nine months of 1997 and 1996, CIGNA established valuation reserves of
  $23 million and $53 million,  respectively,  for problem and  potential  problem
  mortgage   loans.   These   amounts   included  $11  million  and  $30  million,
  respectively, attributable to policyholder contracts.
  
  See the Summary on page 18 for the effect of valuation  reserves on policyholder
  contracts and on CIGNA's net income.
  
        Effect of Non-Accruals for Mortgage Loans
  
  CIGNA recognizes  interest income on problem mortgage loans only when payment is
  received. See the Summary on page 18 for the effect of non-accruals for mortgage
  loans on policyholder contracts and on CIGNA's net income.
  
   Real Estate
  
  As of September 30, 1997 and December 31, 1996,  investment real estate,  net of
  reserves  and  write-downs,   included:   1)  $466  million  and  $495  million,
  respectively,  of real  estate  held for the  production  of income  and 2) $557
  million and $607 million,  respectively, of real estate held for sale, primarily
  properties acquired as a result of foreclosure of mortgage loans.
  
        Real Estate Write-downs and Valuation
        Reserves
  
  CIGNA had cumulative  write-downs  and valuation  reserves for real estate as of
  September  30,  1997 and 1996 of $294  million and $391  million,  respectively,
  including $159 million and $197 million attributable to policyholder contracts.
  
  See the Summary on page 18 for the effect of write-downs and valuation  reserves
  on policyholder contracts and on CIGNA's net income.
  
                                         17
  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 September 30,                    Nine Months Ended September 30,
                         -------------------------------------------------   -------------------------------------------------
                                  1997                      1996                      1997                      1996
                         -----------------------   -----------------------   ------------------------  -----------------------
                          Policyholder               Policyholder              Policyholder              Policyholder
  (In millions)              Contracts     CIGNA        Contracts    CIGNA        Contracts     CIGNA       Contracts    CIGNA
  ----------------------------------------------------------------------------------------------------------------------------
  Write-downs and
  valuation
  reserves:
     Bonds                         $6       $12             $6         $8             $13        $20           $14        $19
     Mortgage loans                 5         3              1          1              11          8            30         14
     Real estate                   (2)       --              1         --              (1)         2            --          1
  ----------------------------------------------------------------------------------------------------------------------------
  Total                            $9       $15             $8         $9             $23        $30           $44        $34
  ============================================================================================================================
  Non-accruals:
     Bonds                         $2        $3             $3         $4              $5         $8            $8        $12
     Mortgage loans                (1)       --              2         --              (2)        --             5          1
  ----------------------------------------------------------------------------------------------------------------------------
  Total                            $1        $3             $5         $4              $3         $8           $13        $13
  ============================================================================================================================
  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,   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 STATEMENT
  
  Except for historical  information provided in this Management's  Discussion and
  Analysis,  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;  6)  charges in  CIGNA's  health  care  operations
  associated with restructuring activities and the Healthsource  acquisition;  and
  7)  completion  of the  sale  of  its  individual  life  insurance  and  annuity
  businesses.
  
                                         18
  Part II.  OTHER INFORMATION
  
  Item 6.           Exhibits and Reports on Form 8-K.
  
                    (a)      See Exhibit Index.
  
                    (b)      During the quarterly period ended September 30, 1997,
                             and as of the filing date,  CIGNA filed the following
                             Reports on Form 8-K:
  
                             o        dated July 30,  1997,  Item 5 - containing a
                                      news release  regarding  its second  quarter
                                      1997 results.
  
                             o        dated August 4, 1997,  Item 5 - containing a
                                      news release  regarding  the adoption of the
                                      Shareholder Rights Agreement.
  
                             o        dated October 1, 1997, Item 5 - containing a
                                      news release regarding its preliminary third
                                      quarter 1997 earnings estimates.
  
                             o        dated October 30, 1997,  Item 5 - containing
                                      a news release  regarding  its third quarter
                                      1997 earnings results.
  
                                         19
  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:    November 7, 1997
  
                                         20
  Exhibit Index
  
                                                             Method of
  Number    Description                                        Filing
  
  3         Restated Certificate of Incorporation          Filed herewith.
            of the Registrant as last amended
            August 4, 1997
  
  11        Computation of Earnings                        Filed herewith.
            Per Share
  
  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.
  
                                         21