content: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 10-Q
  
                [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
  
                    For the quarterly period ended June 30, 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 June 30,  1997,  74,014,308  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                              9
  
  
  PART II. OTHER INFORMATION
  
           Item 4. Submission of Matters to a Vote of
                     Security Holders                                      19
  
           Item 6. Exhibits and Reports on Form 8-K                        20
  
  SIGNATURE                                                                21
  
  EXHIBIT INDEX                                                            22
  
  <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          Six Months Ended
                                                      June 30,                  June 30,
                                                 1997         1996         1997         1996
  ===========================================================================================
  <S>                                          <C>          <C>          <C>          <C>    
  REVENUES
  Premiums and fees                            $ 3,482      $ 3,499      $ 6,870      $ 6,889
  Net investment income                          1,062        1,111        2,115        2,194
  Other revenues                                   163          152          323          294
  Realized investment gains (losses)                12          (31)          56           (1)
                                               -------      -------      -------      -------
      Total revenues                             4,719        4,731        9,364        9,376
                                               -------      -------      -------      -------
  
  BENEFITS, LOSSES AND EXPENSES
  Benefits, losses and settlement expenses       3,065        3,129        6,074        6,273
  Policy acquisition expenses                      270          322          534          594
  Other operating expenses                         973          935        1,908        1,806
                                               -------      -------      -------      -------
      Total benefits, losses and expenses        4,308        4,386        8,516        8,673
                                               -------      -------      -------      -------
  
  INCOME BEFORE INCOME TAXES                       411          345          848          703
                                               -------      -------      -------      -------
  
  Income taxes:
      Current                                      124           36          234          112
      Deferred                                       8           78           47          122
                                               -------      -------      -------      -------
          Total taxes                              132          114          281          234
                                               -------      -------      -------      -------
  
  NET INCOME                                       279          231          567          469
  Common dividends declared                        (62)         (62)        (123)        (122)
  Retained earnings, beginning of period         5,082        4,219        4,855        4,041
  -------------------------------------------------------------------------------------------
  
  RETAINED EARNINGS, END OF PERIOD             $ 5,299      $ 4,388      $ 5,299      $ 4,388
  ---------------------------------------------==============================================
  
  EARNINGS PER SHARE                           $  3.73      $  3.00      $  7.59      $  6.10
  ---------------------------------------------==============================================
  
  DIVIDENDS DECLARED PER SHARE                 $  0.83      $  0.80      $  1.66      $  1.60
  ---------------------------------------------==============================================
  </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
                                                                              June 30,    December 31,
                                                                                1997          1996
  ==================================================================================================
  <S>                                                                          <C>            <C>   
  ASSETS
  Investments:
     Fixed maturities, at fair value (amortized cost, $33,198; $33,404)     $  34,470      $  34,933
     Equity securities, at fair value (cost, $594; $573)                          799            701
     Mortgage loans                                                            10,973         10,927
     Policy loans                                                               7,255          7,296
     Real estate                                                                1,040          1,102
     Other long-term investments                                                  238            255
     Short-term investments                                                       918          1,320
                                                                            ---------      ---------
         Total investments                                                     55,693         56,534
  
  Cash and cash equivalents                                                     1,689          1,287
  Accrued investment income                                                       991            890
  Premiums, accounts and notes receivable                                       4,415          4,229
  Reinsurance recoverables                                                      6,926          7,287
  Deferred policy acquisition costs                                             1,298          1,230
  Property and equipment                                                          870            802
  Deferred income taxes                                                         1,937          1,998
  Other assets                                                                    986            993
  Goodwill and other intangibles                                                2,563          1,068
  Separate account assets                                                      26,294         22,614
  --------------------------------------------------------------------------------------------------
          Total assets                                                      $ 103,662      $  98,932
  --------------------------------------------------------------------------========================
  LIABILITIES
  Contractholder deposit funds                                              $  30,046      $  29,878
  Unpaid claims and claim expenses                                             18,527         18,841
  Future policy benefits                                                       11,617         11,784
  Unearned premiums                                                             1,853          1,940
                                                                            ---------      ---------
           Total insurance and contractholder liabilities                      62,043         62,443
  Accounts payable, accrued expenses and other liabilities                      5,598          5,326
  Current income taxes                                                            134            221
  Short-term debt                                                                 735            289
  Long-term debt                                                                1,500          1,021
  Separate account liabilities                                                 26,104         22,424
  --------------------------------------------------------------------------------------------------
           Total liabilities                                                   96,114         91,724
  --------------------------------------------------------------------------------------------------
  CONTINGENCIES - NOTE 9
  
  SHAREHOLDERS' EQUITY
  Common stock (shares issued, 88)                                                 88             88
  Additional paid-in capital                                                    2,610          2,572
  Net unrealized appreciation, fixed maturities                                   433            539
  Net unrealized appreciation, equity securities                                  136             88
  Net translation of foreign currencies                                           (73)           (45)
  Retained earnings                                                             5,299          4,855
  Less treasury stock, at cost                                                   (945)          (889)
  --------------------------------------------------------------------------------------------------
           Total shareholders' equity                                           7,548          7,208
  --------------------------------------------------------------------------------------------------
           Total liabilities and shareholders' equity                       $ 103,662      $  98,932
  --------------------------------------------------------------------------========================
  SHAREHOLDERS' EQUITY PER SHARE                                            $  101.98      $   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>
                                                                           Six Months Ended June 30,
                                                                                1997        1996
  ================================================================================================
  <S>                                                                        <C>          <C>    
  CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                                             $   567      $   469
      Adjustments to reconcile net income to net cash
          provided by (used in) operating activities:
              Insurance liabilities, net of reinsurance recoverables             143         (140)
              Premiums, accounts and notes receivable                            (36)        (109)
              Accounts payable, accrued expenses, other liabilities and
                  current income taxes                                          (180)        (343)
              Deferred income taxes                                               47          122
              Realized investment (gains) losses                                 (56)           1
              Gain on sale of businesses and other equity interests               --          (18)
              Other, net                                                        (132)         (40)
                                                                             -------      -------
              Net cash provided by (used in) operating activities                353          (58)
                                                                             -------      -------
  
  CASH FLOWS FROM INVESTING ACTIVITIES
      Proceeds from investments sold:
          Fixed maturities                                                     3,128        3,447
          Equity securities                                                      148          218
          Mortgage loans                                                         322          265
          Other (primarily short-term investments)                             6,629        6,449
      Investment maturities and repayments:
          Fixed maturities                                                     1,974        1,992
          Mortgage loans                                                         241          357
      Investments purchased:
          Fixed maturities                                                    (4,905)      (4,528)
          Equity securities                                                     (193)        (238)
          Mortgage loans                                                        (714)        (906)
          Other (primarily short-term investments)                            (5,821)      (6,463)
      Net cash from acquisitions and dispositions                             (1,288)          66
      Other, net                                                                 (69)         (61)
                                                                             -------      -------
          Net cash provided by (used in) investing activities                   (548)         598
                                                                             -------      -------
  
  CASH FLOWS FROM FINANCING ACTIVITIES
      Deposits and interest credited to contractholder deposit funds           3,656        3,108
      Withdrawals and benefit payments from contractholder deposit funds      (3,576)      (3,570)
      Net issuance (repayment) of short-term debt                                146          (24)
      Issuance of long-term debt                                                 600           --
      Repurchase of common stock                                                 (55)         (41)
      Repayment of debt                                                          (26)          (8)
      Common dividends paid                                                     (122)        (122)
      Other, net                                                                  (3)           7
                                                                             -------      -------
         Net cash provided by (used in) financing activities                     620         (650)
                                                                             -------      -------
  Effect of foreign currency rate changes on cash and cash equivalents           (23)         (15)
  -----------------------------------------------------------------------------------------------
  Net increase (decrease) in cash and cash equivalents                           402         (125)
  Cash and cash equivalents, beginning of period                               1,287        1,559
  -----------------------------------------------------------------------------------------------
  
  Cash and cash equivalents, end of period                                   $ 1,689      $ 1,434
  ---------------------------------------------------------------------------====================
  
  Supplemental Disclosure of Cash Information:
      Income taxes paid, net of refunds                                      $   311      $   125
      Interest paid                                                          $    47      $    55
  -----------------------------------------------------------------------------------------------
  </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
  
  On June 25, 1997,  CIGNA acquired  substantially  all of the outstanding  common
  stock of  Healthsource,  Inc.  (Healthsource)  for  approximately  $1.7 billion,
  including the cost of retiring  Healthsource debt of approximately  $250 million
  which is expected to occur in the third quarter.  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 effects on CIGNA's results of operations  from acquiring  Healthsource
  from the date of  acquisition  to June 30,  1997 were not  material.  Intangible
  assets and goodwill of $1.5 billion will be amortized on a  straight-line  basis
  over periods ranging from eight to 40 years.
  
  During the next several  months,  CIGNA will complete its fair value analysis of
  Healthsource's  net assets and will finalize plans for integrating  Healthsource
  with CIGNA. The effect on goodwill and net income from these  initiatives is not
  reasonably  estimable  at this time;  however,  they are not  expected to have a
  material  effect  on  CIGNA's  financial  condition  or  liquidity,   but  could
  materially affect results of operations.
  
  Healthsource's  total  revenues  were $971  million and $862 million for the six
  months  ended  June 30,  1997 and 1996,  respectively.  The pro forma  effect on
  CIGNA's  net  income for the six  months  ended  June 30,  1997 and 1996 was not
  material.
  
                                          4
  <PAGE>
  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 $242  million and $473  million for the second  quarter and six
  months of 1997,  respectively,  compared  with $221 million and $444 million for
  the same periods  last year.  Net income was $21 million and $48 million for the
  second  quarter and six months of 1997,  respectively,  compared with $5 million
  and $24 million for the same periods of 1996.
  
  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 a reinsurance arrangement, and will result in a gain on
  the sale of approximately $700 million,  a significant  portion of which 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 six 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           Six Months
                                   Ended                  Ended
                                  June 30,              June 30,
  (In millions)               1997        1996        1997       1996
  ----------------------------------------------------------------------
  Realized investment
  gains (losses):
       Fixed maturities           $3         ($14)       $29        ($3)
       Equity securities           9            1         14          9
       Mortgage loans             (1)         (18)       (14)       (20)
       Real estate                (1)          (4)        17          1
       Other                       2            4         10         12
                           ---------------------------------------------
                                  12          (31)        56         (1)
  Less income taxes
  (benefits)                       3          (10)        19          1
  ----------------------------------------------------------------------
  Net realized investment
  gains (losses)                  $9         ($21)       $37        ($2)
  -------------------------=============================================
  
  Fixed Maturities and Equity Securities
  
  Sales of  available-for-sale  fixed maturities and equity securities,  including
  policyholder share, were as follows:
  ----------------------------------------------------------------------
                                  Three Months           Six Months
                                     Ended                  Ended
                                    June 30,              June 30,
  (In millions)                1997        1996        1997       1996
  ----------------------------------------------------------------------
  Proceeds from sales         $1,689       $1,534     $3,276     $3,665
  Gross gains on sales            67           14         86         94
  Gross losses on sales          (49)         (35)       (60)       (80)
  ----------------------------------------------------------------------
  
  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 second  quarter  and six
  months  of  1997  increased  by  $209  million  and  decreased  by $58  million,
  respectively,  compared with  decreases of $102 million and $567 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           Six Months
                                     Ended                  Ended
                                    June 30,              June 30,
  (In thousands)               1997        1996        1997       1996
  ----------------------------------------------------------------------
  Weighted average
  common shares               74,740       76,821     74,664     76,854
  ----------------------------------------------------------------------
  
  There is no significant difference between earnings per share on a primary and a
  fully diluted basis.
  
  Common shares held as Treasury  shares were 13,724,063 and 11,344,351 as of June
  30, 1997 and 1996, respectively.
  
                                          5
  <PAGE>
  
  NOTE 6-COMMON AND PREFERRED STOCK
  
  On July 23, 1997,  CIGNA's Board of Directors  approved a new shareholder rights
  plan,  which  replaces  the plan that  expired on August 4, 1997.  Under the new
  plan, which expires on August 4, 2007,  Preferred Stock Purchase Rights (Rights)
  attach to all  outstanding  shares of CIGNA common stock.  The Rights trade with
  the stock until the Rights become  exercisable.  They are exercisable  only if a
  party  acquires,  or  announces a tender  offer to  acquire,  10% or more of the
  outstanding  common  stock,  unless  CIGNA's  Board of  Directors  approves  the
  transaction.  Each Right  entitles the  shareholder  to buy for a $780  exercise
  price 1/100 of a share of Junior Participating  Preferred Stock Series D, having
  dividend and voting  rights  approximately  equal to one share of common  stock.
  Upon  the  acquisition  of 10% or more of the  outstanding  common  stock  by an
  acquirer,  all Rights  holders  except the acquirer  may,  except under  certain
  circumstances,  purchase  shares of common stock worth twice the exercise price.
  If, after the acquisition of 10% or more of the outstanding  common stock, CIGNA
  is  acquired  in a merger  or other  business  combination  transaction,  Rights
  holders may  purchase the  acquirer's  shares at a similar  discount.  CIGNA may
  redeem the Rights for one cent each at any time before an acquirer  acquires 10%
  of its outstanding common stock, and thereafter under certain circumstances.
  
  NOTE 7-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 has completed audits of the
  years 1982 through 1990.  One issue,  which relates only to years prior to 1989,
  remains outstanding,  and it could result in an assessment of approximately $210
  million. CIGNA is contesting the assessment and believes that it should prevail.
  
  In management's opinion,  adequate tax liabilities have been established for all
  years.
  
  As of June 30, 1997, CIGNA had no tax basis operating loss carryforwards.
  
  NOTE 8-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 $716 million and
  $711  million as of June 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 second  quarter  and six months of 1997,  premiums  and fees were net of
  ceded  premiums of $589 million and $1.0 billion,  respectively.  For the second
  quarter and six months of 1996,  premiums and fees were net of ceded premiums of
  $536 million and $980 million,  respectively.  In addition, benefits, losses and
  settlement  expenses  for the second  quarter and six months of 1997 were net of
  reinsurance recoveries of $429 million and $687 million, respectively. Benefits,
  losses and  settlement  expenses  for the second  quarter and six months of 1996
  were  net  of   reinsurance   recoveries  of  $503  million  and  $771  million,
  respectively.
  
  NOTE 9-CONTINGENCIES AND OTHER MATTERS
  
  Financial Guarantees
  
  CIGNA,  through its subsidiaries,  is contingently  liable for various financial
  guarantees provided in the ordinary course of business. These include guarantees
  for the repayment of industrial  revenue bonds as well as other debt instruments
  and  guarantees  of a minimum  level of benefits  for certain  separate  account
  contracts.  Although the ultimate outcome of any loss contingencies arising from
  CIGNA's  financial  guarantees  may  adversely  affect  results of operations in
  future periods, they are not
  
                                          6
  <PAGE>
  
  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.  The effect of the legislation on the Individual
  Financial Services segment's income is not expected to be material through 1998.
  Beginning in 1999, the effect of the legislation is uncertain; however, it could
  have a material  adverse effect on the segment's  income.  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.
  
  Federal and state proposals have been made to place limitations on 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.
  
  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.
  
                                          7
  <PAGE>
  
  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.
  
  
  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.
  
                                          8
  
  <PAGE>
  Item 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations
  
  INTRODUCTION
  
  The following  discussion addresses the financial condition of CIGNA Corporation
  (CIGNA) as of June 30, 1997, compared with December 31, 1996, and its results of
  operations for the quarter and six months ended June 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  quarter  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.
  
  On June 25, 1997,  CIGNA acquired  substantially  all of the outstanding  common
  stock of  Healthsource,  Inc.  (Healthsource)  for  approximately  $1.7 billion,
  including the cost of retiring  Healthsource debt of approximately  $250 million
  which is expected to occur in the third quarter.  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 effects on CIGNA's results of operations  from acquiring  Healthsource
  from the date of  acquisition  to June 30,  1997 were not  material.  Intangible
  assets and goodwill of $1.5 billion will be amortized on a  straight-line  basis
  over periods ranging from eight to 40 years.
  
  During the next several  months,  CIGNA will complete its fair value analysis of
  Healthsource's  net assets and will finalize plans for integrating  Healthsource
  with CIGNA. The effect on goodwill and net income from these  initiatives is not
  reasonably  estimable  at this time;  however,  they are not  expected to have a
  material  effect  on  CIGNA's  financial  condition  or  liquidity,   but  could
  materially affect results of operations.
  
  Healthsource's  total  revenues  were $971  million and $862 million for the six
  months  ended  June 30,  1997 and 1996,  respectively.  The pro forma  effect on
  CIGNA's  net  income for the six  months  ended  June 30,  1997 and 1996 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     Six Months Ended
                                   June 30,              June 30,
  (In millions)                1997        1996       1997      1996
  -------------------------------------------------------------------
  Revenues                     $242        $221       $473      $444
  Operating income*             $22          $7        $44       $24
  Net income                    $21          $5        $48       $24
  ===================================================================
  
  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 a reinsurance arrangement, and will result in a gain on
  the sale of approximately $700 million,  a significant  portion of which 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  modifying  its  information  systems to ensure that they are
  capable  of  processing  information  for the year 2000 and  beyond.  Management
  expects its systems to be  compliant  for the year 2000,  and the costs of these
  efforts  are not  expected  to have a  material  effect on  CIGNA's  results  of
  operations.
  
  As a result of the planned sale of CIGNA's individual life insurance and annuity
  businesses,  Duff & Phelps Credit  Rating Co.  placed the claims paying  ability
  rating of  Connecticut  General Life Insurance  Company (AAA,  "Highest," 1st of
  18), one of CIGNA's  principal life insurance  company  subsidiaries,  on rating
  watch -- down.
  
  --------
  * Operating  income (loss) is defined as net income (loss)  excluding  after-tax
  realized investment results.
  
                                          9
  <PAGE>
  
  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 9 to the  Financial
  Statements.   Also,   see  Note  7  regarding  a  proposed  IRS   assessment  of
  approximately  $210 million.  CIGNA is contesting the assessment and believes it
  should prevail.
  
  CONSOLIDATED RESULTS OF OPERATIONS
  
  ===================================================================
  FINANCIAL SUMMARY        Three Months Ended    Six Months Ended
                                June 30,             June 30,
  (In millions)                 1997      1996        1997     1996
  -------------------------------------------------------------------
  Premiums and fees           $3,482    $3,499      $6,870   $6,889
  Net investment income        1,062     1,111       2,115    2,194
  Other revenues                 163       152         323      294
  Realized investment gains
  (losses)                        12       (31)         56       (1)
                          -----------------------------------------
  Total revenues               4,719     4,731       9,364    9,376
  Benefits and expenses        4,308     4,386       8,516    8,673
                          -----------------------------------------
  Income before taxes            411       345         848      703
  Income taxes                   132       114         281      234
                          -----------------------------------------
  Net income                    $279      $231        $567     $469
  ------------------------===========================================
  Realized investment gains
  (losses), net of taxes          $9      ($21)        $37      ($2)
  ------------------------===========================================
  
  CIGNA's 1997  consolidated  net income increased 21% for both the second quarter
  and six months,  compared with the same periods last year.  Operating income for
  the second  quarter and six months of 1997 was $270  million  and $530  million,
  respectively,  compared  with $252 million and $471 million for the same periods
  last year. These increases reflect improvement in most of the business segments.
  
  After-tax  realized  investment  results improved for the second quarter and six
  months  of 1997 from the same  periods  last  year.  These  increases  primarily
  reflect gains on sales of fixed  maturities and equity  securities  and, for the
  six months,  real estate. In addition,  these increases reflect lower 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.
  
  EMPLOYEE LIFE AND HEALTH BENEFITS
  
  ===================================================================
  FINANCIAL SUMMARY            Three Months Ended    Six Months Ended
                                   June 30,              June 30,
   (In millions)                1997      1996       1997       1996
  -------------------------------------------------------------------
   Premiums and fees          $2,117    $2,075     $4,220     $4,152
   Net investment income         138       143        273        287
   Other revenues                117        99        224        202
   Realized investment gains
   (losses)                        1        (7)         7         (9)
                               --------------------------------------
   Total revenues              2,373     2,310      4,724      4,632
   Benefits and expenses       2,186     2,139      4,352      4,291
                              --------------------------------------
   Income before taxes           187       171        372        341
   Income taxes                   59        54        123        114
                              --------------------------------------
   Net income                   $128      $117       $249       $227
  ----------------------------======================================
   Realized investment gains
   (losses), net of taxes         $2       ($4)        $6        ($6)
  ----------------------------======================================
  
  Net income for the Employee Life and Health  Benefits  segment  increased 9% for
  the second  quarter and 10% for the six months of 1997,  compared  with the same
  periods  last year.  Operating  income was $126 million and $243 million for the
  second  quarter  and six months of 1997,  compared  with $121  million  and $233
  million for the same periods last year.  Operating  income for the Indemnity and
  HMO operations was as follows:
  
  ===================================================================
                            Three Months Ended     Six Months Ended
                                 June 30,              June 30,
   (In millions)               1997         1996       1997      1996
  -------------------------------------------------------------------
   Indemnity operations         $68          $69       $126      $125
   HMO operations                58           52        117       108
  -------------------------------------------------------------------
   Total                       $126         $121       $243      $233
  ===================================================================
  
  Indemnity  operating  income for the second  quarter  and six months of 1997 was
  about even with the same periods last year. The second quarter and six months of
  1997 include  improvements of $8 million and $12 million,  respectively,  in the
  segment's long-term  disability (LTD) business resulting from rate increases and
  strengthened  underwriting.  Also favorably affecting these periods was improved
  group life insurance claim  experience.  Offsetting these 1997 improvements were
  unfavorable medical claim experience, higher operating expenses primarily due
  
                                         10
  <PAGE>
  
  to customer service initiatives,  and decreased investment income resulting from
  lower average assets and yields.
  
  HMO results  for the second  quarter  and six months of 1997  include  favorable
  after-tax adjustments of $9 million and $13 million, respectively,  from certain
  reserve  reviews  compared with $5 million for the second quarter and six months
  of 1996.  Results  for the six  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 $49 million and $104 million for the second quarter and
  six months of 1997, respectively,  compared with $47 million and $95 million for
  the same periods last year. These improvements  primarily reflect rate increases
  and membership growth,  particularly for dental HMOs, partially offset by higher
  operating expenses associated with growth and customer service initiatives.
  
  Premiums  and fees  increased  2% for both the second  quarter and six months of
  1997,  compared to the same periods last year. Growth in premiums is expected to
  continue  to be  constrained  by  competitive  pressures  in  both  the  medical
  indemnity and HMO markets.
  
  Total HMO membership  increased 7% since June 30, 1996 and 6% since December 31,
  1996, primarily reflecting  membership growth in CIGNA's HMO alternative funding
  programs.  Under these  programs,  the customer  assumes all or a portion of the
  responsibility for funding claims. CIGNA generally earns a lower margin on these
  programs than under traditional HMO plans.
  
  Management  believes  that  adding  premium  equivalents  to  premiums  and fees
  (adjusted  premiums  and fees)  produces a more  meaningful  measure of business
  volume.  Premium  equivalents for the second quarter and six months of 1997 were
  approximately $2.4 billion and $4.8 billion. These amounts represent an increase
  of 2% and a decrease of 1% compared with the same periods last year.  Generally,
  premium  equivalents for  alternative  funding  programs  reflect 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 53% and 54% of total adjusted premiums and fees for the
  six months of 1997 and 1996,  respectively.  Administrative  Services Only (ASO)
  plans  accounted for 49% of total adjusted  premiums and fees for the six months
  of 1997 and 1996.
  
  As discussed on page 9, the effects of the  Healthsource  acquisition  since the
  acquisition date were not material.
  
   EMPLOYEE RETIREMENT AND SAVINGS BENEFITS
  
  ==================================================================
   FINANCIAL SUMMARY       Three Months Ended     Six Months Ended
                                June 30,              June 30,
   (In millions)                1997      1996       1997       1996
  ------------------------------------------------------------------
   Premiums and fees             $52       $50        $98        $88
   Net investment income         397       431        799        859
   Realized investment gains
   (losses)                        2        (6)        14         10
                             ---------------------------------------
   Total revenues                451       475        911        957
   Benefits and expenses         372       415        740        806
                             ---------------------------------------
   Income before taxes            79        60        171        151
   Income taxes                   25        20         55         50
                             ---------------------------------------
   Net income                    $54       $40       $116       $101
  ---------------------------=======================================
   Realized investment gains
   (losses), net of taxes         $1       ($4)        $9         $6
  ---------------------------=======================================
  
  Net income for the Employee  Retirement and Savings Benefits  segment  increased
  35% and 15% for the second  quarter  and six months of 1997,  compared  with the
  same  periods of 1996.  Results  for the second  quarter  and six months of 1996
  include an  after-tax  charge of $8 million for  expected  state  guaranty  fund
  assessments.  Operating  income was $53 million and $107  million for the second
  quarter and six months of 1997,  compared  with $52 million and $103 million for
  the same periods last year excluding the above charge.  These increases  reflect
  higher  earnings  from an increased  asset base  primarily  in separate  account
  equity funds, which generally have lower margins than general account investment
  vehicles, partially offset by lower investment yields.
  
  Premiums and fees  increased 4% and 11% for the second quarter and six months of
  1997,  respectively,  compared  with  the  same  periods  last  year,  primarily
  reflecting higher annuity sales.
  
  Net investment  income decreased 8% and 7% for the second quarter and six months
  of 1997, respectively, compared with the same periods last year. These decreases
  primarily reflect lower investment yields and customers' continued
  
                                         11
  <PAGE>
  redirection  of a portion  of their  investments  from the  general  account  to
  separate accounts.
  
  Assets  under  management  is generally a key  determinant  of earnings for this
  segment.  For the six months ended June 30, assets under  management and related
  activity, including amounts attributable to separate accounts, were as follows:
  
  ========================================================================
   (In millions)                                      1997           1996
  ------------------------------------------------------------------------
   Balance -- January 1                            $ 40,587      $ 38,183
   Premiums and deposits                              3,598         3,068
   Investment results                                 1,200         1,360
   Increase (decrease) in fair value of assets        1,711          (422)
   Customer withdrawals                              (1,220)       (1,236)
   Other, including participant withdrawals
    and benefit payments                             (2,043)       (2,481)
  ------------------------------------------------------------------------
   Balance -- June 30                              $ 43,833      $ 38,472
  ========================================================================
  
  Premiums and deposits increased 17% in the six months of 1997, compared with the
  same  period  in 1996,  primarily  reflecting  higher  recurring  deposits  from
  existing  customers.  Sales  to new  customers  and new plan  sales to  existing
  customers  were  approximately  52% and 57% of premiums and deposits for the six
  months  of 1997 and 1996,  respectively.  The  decrease  in  investment  results
  reflects  the  absence of  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.  The
  decrease in other  compared  with 1996 is due to lower  scheduled  maturities on
  guaranteed investment contracts.
  
  Management expects asset growth to continue to be constrained due to the lack of
  growth in the defined benefit market  resulting from  customers'  preference for
  defined  contribution  products.  In  addition,  assets  under  management  will
  continue to be affected by market value  fluctuations  for fixed  maturities and
  equity securities.
  
  
   INDIVIDUAL FINANCIAL SERVICES
  
  =================================================================
   FINANCIAL SUMMARY       Three Months Ended    Six Months Ended
                                June 30,             June 30,
   (In millions)                1997      1996       1997      1996
  -----------------------------------------------------------------
   Premiums and fees            $249      $209       $483      $445
   Net investment income         271       271        531       523
   Other revenues                 15        21         29        38
   Realized investment gains                 
   (losses)                       (2)       (2)        11        --
                              -------------------------------------
   Total revenues                533       499      1,054     1,006
   Benefits and expenses         461       437        897       892
                              -------------------------------------
   Income before taxes            72        62        157       114
   Income taxes                   25        22         55        40
                              -------------------------------------
   Net income                    $47       $40       $102       $74
  ----------------------------=====================================
   Realized investment gains
   (losses), net of taxes        ($1)      ($2)        $7       $--
  ----------------------------=====================================
  
  Net income for the Individual  Financial  Services segment increased 18% and 38%
  for the second quarter and six months of 1997,  respectively,  compared with the
  same  periods last year.  Results for the second  quarter and six months of 1996
  include a net after-tax  charge of $3 million  resulting  from account  reviews.
  Operating  income was $48 million and $95 million for the second quarter and six
  months of 1997,  compared with $45 million and $77 million,  excluding the above
  charge,  for the same  periods  last year.  These  increases  primarily  reflect
  favorable mortality and, to a lesser extent, business growth.
  
  For the second  quarter and six months of 1997,  premiums and fees increased 19%
  and 9%,  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 leveraged  corporate-owned  life insurance
  (COLI) renewal premiums.
  
  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 $286 million and operating  income of $19 million for the six months
  of 1997 were from leveraged COLI products that are affected by this legislation.
  The effect of the legislation on the segment's  operating income is not expected
  to be material through 1998. Beginning in 1999, the effect of the legislation is
  uncertain;  however,  it could have a material  adverse  effect on the segment's
  operating  income.  CIGNA does not expect  this  legislation  to have a material
  effect  on its  consolidated  results  of  operations,  liquidity  or  financial
  condition.
  
                                         12
  <PAGE>
  
  A significant  portion of this  segment's  businesses are expected to be sold by
  the end of 1997. See page 9 for further discussion.
  
   PROPERTY AND CASUALTY
  
  =================================================================
   FINANCIAL SUMMARY        Three Months Ended   Six Months Ended
                                 June 30,            June 30,
   (In millions)                1997      1996       1997      1996
  -----------------------------------------------------------------
   Premiums and fees          $1,064    $1,165     $2,069    $2,204
   Net investment income         189       208        384       405
   Other revenues                 65        60        137       113
   Realized investment gains
   (losses)                       11       (13)        24        --
                             --------------------------------------
   Total revenues              1,329     1,420      2,614     2,722
   Benefits and expenses       1,238     1,345      2,428     2,579
                             --------------------------------------
   Income before taxes            91        75        186       143
   Income taxes                   25        24         55        42
                             --------------------------------------
   Net income                    $66       $51       $131      $101
  ----------------------------=====================================
   Realized investment gains
   (losses), net of taxes         $7       ($8)       $15       $--
  ----------------------------=====================================
  
  Net income for the Property and Casualty  segment  increased 29% and 30% for the
  second  quarter  and six months of 1997,  respectively,  compared  with the same
  periods last year.
  
  Operating  income was level for the second quarter and increased 15% for the six
  months of 1997, compared with the same periods in 1996. Operating income for the
  ongoing and run-off operations was as follows:
  =================================================================
                              Three Months Ended   Six Months Ended
                                    June 30,            June 30,
   (In millions)                1997      1996       1997      1996
  -----------------------------------------------------------------
   Ongoing operations:
  
     International               $36       $36        $69       $65
     Domestic                     23        20         46        32
                               ------------------------------------
       Total ongoing
         operations               59        56        115        97
   Run-off operations             --         3          1         4
  -----------------------------------------------------------------
       Total                     $59       $59       $116      $101
  =================================================================
  
  Operating  income for the second  quarter and six months ended June 30, 1997 for
  international  operations  includes  a $6  million  after-tax  charge  for  cost
  reduction   activities,   primarily   severance.   Excluding  this  charge,  the
  improvement  for the second quarter and six months of 1997 in the  international
  operations  reflects improved  international life insurance results and, for the
  six  months,  favorable  claim  experience  in the  international  property  and
  casualty operations.  Improvement in the domestic operations' results for second
  quarter  and six months  primarily  reflects  lower  catastrophes  and,  for the
  quarter,  favorable prior year  development,  partially offset by lower premiums
  and fees in 1997. Results for the international and domestic operations continue
  to reflect a highly competitive pricing environment.
  
  Premiums  and fees  declined  9% and 6% in the second  quarter and six months of
  1997, 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 $50 million
  and $70 million, respectively).  Strong growth in the international accident and
  health and, to a lesser  extent,  international  property and casualty  lines of
  business partially offset these declines.
  
  The domestic ongoing operations had pre-tax catastrophe losses of $2 million and
  $14 million, net of reinsurance,  for the second quarter and six months of 1997,
  compared  with $8  million  and  $31  million  for the  same  periods  of  1996.
  Catastrophe losses for the six months of 1996 include $18 million for East Coast
  winter storms.  The  international  operations had no catastrophe  losses in the
  second  quarter and six months of 1997 and 1996.  The effects of  reinsurance on
  catastrophe losses for the periods presented were not material.
  
  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 June 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
  
                                         13
  <PAGE>
  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 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  $6.3  billion  and $6.8
  billion  as of June 30,  1997 and  December  31,  1996,  net of  allowances  for
  unrecoverable reinsurance of $716 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 six months ended June 30:
  =================================================================
                              Three Months Ended   Six Months Ended
                                    June 30,            June 30,
   (In millions)                 1997      1996      1997      1996
  -----------------------------------------------------------------
   By business operation:
     Ongoing operations           ($7)      $17       $14       $17
     Run-off operations            47        36       100        72
  -----------------------------------------------------------------
   Total                          $40       $53      $114       $89
  =================================================================
   By type of loss:
     Asbestos-related             $27       $10       $48       $14
     Environmental pollution        8         9        14        26
     Unrecoverable
        reinsurance                 3        14         9        18
     Workers' compensation          6         7        18        19
     Other                         (4)       13        25        12
  -----------------------------------------------------------------
   Total                          $40       $53      $114       $89
  =================================================================
  
  The favorable  effect on Other prior year development for the second quarter was
  primarily  attributable  to the commercial  package line of business,  while the
  unfavorable development for the six months of 1997 was primarily attributable to
  development on assumed reinsurance, commercial fire 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 $16  million and $31 million for the second
  quarter and six months  ended June 30,  1997,  respectively,  compared  with net
  losses of $17 million and $34 million for the same  periods in 1996.  Net losses
  included after-tax  realized  investment losses of $3 million and $2 million for
  the second  quarter and six months of 1996.  There were no  realized  investment
  gains or losses for the second quarter and six months ended June 30, 1997.
  
                                         14
  <PAGE>
   LIQUIDITY AND CAPITAL RESOURCES
  
  Liquidity  for CIGNA  and its  insurance  subsidiaries  has  remained  strong as
  evidenced by  significant  amounts of short-term  investments  and cash and cash
  equivalents   in  the  aggregate.   Generally,   CIGNA  has  met  its  operating
  requirements  by maintaining  appropriate  levels of liquidity in its investment
  portfolio and through utilization of overall positive cash flows.
  
  For the six months of 1997,  cash and cash  equivalents  increased  $402 million
  from $1.3 billion as of December 31, 1996. The increase  primarily reflects cash
  provided by operating  activities  ($353 million),  reflecting  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  ($146
  million).  The  increase  in cash  flows  was  partially  offset by cash used in
  investing activities ($548 million,  which includes the $1.3 billion acquisition
  of  Healthsource  partially  offset by net  investment  sales) and  payments  of
  dividends  on  and  repurchases  of  CIGNA  common  stock  ($177  million).  For
  additional  information  regarding the funding of the Healthsource  acquisition,
  see page 9.
  
  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 June 30, 1997,  compared
  with $1.02  billion at December  31,  1996.  This  increase  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 June 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 June 30, 1997, CIGNA's short-term debt amounted to $735 million,  an increase
  of $446 million from December 31, 1996. The increase  includes the assumption of
  debt from  Healthsource of  approximately  $250 million,  which CIGNA expects to
  repay in the third quarter.
  
  In April 1996, CIGNA's Board of Directors  authorized the purchase of up to $500
  million of its common  stock,  depending on  prevailing  market  conditions  and
  alternative  uses of  capital.  Under  this  authorization,  approximately  $350
  million,  or 2.8 million  shares,  of common stock were purchased as of June 30,
  1997. Shares were purchased with internal funds. As a result of the Healthsource
  acquisition, CIGNA suspended stock repurchases. However, CIGNA expects to resume
  the  repurchase  program  due to the  agreement  to  sell  its  individual  life
  insurance and annuity businesses.
  
   INVESTMENT ASSETS
  
  ===================================================================
                                        June 30,        December 31,
   (In millions)                            1997                1996
  ------------------------------------------------------------------
   Fixed maturities                      $34,470             $34,933
   Equity securities                         799                 701
   Mortgage loans                         10,973              10,927
   Real estate                             1,040               1,102
   Other, primarily policy loans           8,411               8,871
  -------------------------------------------------------------------
   Total investment assets               $55,693             $56,534
  ===================================================================
  
  Additional information regarding CIGNA's investment assets is included in Note 4
  to the second 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:
  
  ===================================================================
                                           June 30,     December 31,
                                               1997             1996
  -------------------------------------------------------------------
   Fixed maturities                             29%              28%
   Mortgage loans                               54%              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.
  
                                         15
  <PAGE>
  As of June 30, 1997 and December 31, 1996,  the fair value of fixed  maturities,
  including  policyholder  share,  was greater than amortized cost by $1.3 billion
  and  $1.5  billion,   respectively.  The  decrease  in  unrealized  appreciation
  primarily  reflects  the upward  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 $78 million of potential problem bonds, including amounts attributable
  to policyholder contracts, as of June 30, 1997, compared with $107 million as of
  December  31,  1996.  These  amounts  are net of $7  million  and $5  million of
  cumulative write-downs, respectively.
  
       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 June
  30, 1997 and December  31,  1996,  CIGNA had problem  bonds,  including  amounts
  attributable to policyholder contracts, of $192 million and $160 million, net of
  related cumulative write-downs of $75 million and $125 million, respectively.
  
       Cumulative Write-Downs for Bonds
  
  CIGNA had cumulative  write-downs  for bonds as of June 30, 1997 and 1996 of $83
  million and $156  million,  respectively,  including $25 million and $55 million
  attributable to policyholder contracts.  Also, cumulative write-downs as of June
  30, 1997 and 1996 included $1 million and $2 million, respectively, for bonds no
  longer classified as problem or potential problem bonds.
  
  During the six months of 1997 and 1996,  CIGNA  established  write-downs  of $19
  million and $25 million,  respectively, for problem and potential problem bonds.
  These amounts  included $7 million and $8 million,  attributable to policyholder
  contracts, for the six months of 1997 and 1996, respectively. See the Summary on
  page 18 for the adverse 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 adverse effect of  non-accruals  for bonds on
  policyholder contracts and on CIGNA's net income.
  
  Mortgage Loans
  ===================================================================
                                         June 30,       December 31,
                                             1997               1996
  -------------------------------------------------------------------
   Mortgage loans (in millions)           $10,973            $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 six months of 1997,  $505 million of mortgage loans were scheduled to
  mature,  of which $204 million were paid in full,  $103 million were extended at
  existing  loan rates for a weighted  average of ten months and $69 million  were
  refinanced at current market rates.  Mortgage loan  extensions and  refinancings
  are loans in good standing.  The remaining scheduled  maturities of $129 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.
  
                                         16
  <PAGE>
  
  CIGNA had potential problem mortgage loans,  including  amounts  attributable to
  policyholder contracts, of $290 million as of June 30, 1997, and $384 million as
  of December 31, 1996, net of related  valuation  reserves of $33 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 June 30, 1997,  restructured mortgage loans with
  a carrying value of $225 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  10.30% as of
  June 30, 1997.
  
  CIGNA had problem mortgage loans, including amounts attributable to policyholder
  contracts,  of $284 million and $363 million,  net of valuation  reserves of $33
  million  and  $71  million,   as  of  June  30,  1997  and  December  31,  1996,
  respectively.
  
       Valuation Reserves for Mortgage Loans
  
  CIGNA had valuation reserves for mortgage loans at June 30, 1997 and 1996 of $66
  million and $121  million,  respectively,  including $43 million and $78 million
  attributable to policyholder contracts.
  
  During the six months of 1997 and 1996, CIGNA established  valuation reserves of
  $13 million and $49 million,  respectively,  for problem and  potential  problem
  mortgage loans.  These amounts included $6 million and $29 million  attributable
  to policyholder contracts.
  
  See the  Summary on page 18 for the  adverse  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 adverse effect of non-accruals for
  mortgage loans on policyholder contracts and on CIGNA's net income.
  
  Real Estate
  
  As of June 30, 1997 and  December  31,  1996,  investment  real  estate,  net of
  reserves  and  write-downs,   included:   1)  $469  million  and  $495  million,
  respectively,  of real estate  held for the  production  of income,  and 2) $571
  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 at June
  30, 1997 and 1996 of $321 million and $394 million, respectively, including $175
  million and $200 million attributable to policyholder contracts.
  
  See the Summary on page 18 for the adverse 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 June 30,                                 Six Months Ended June 30,
                      --------------------------------------------------------------------------------------------------------------
                                1997                          1996                          1997                       1996
                      ----------------------        ----------------------         ----------------------     ----------------------
                        Policy-                       Policy-                        Policy-                     Policy-
                         holder                        holder                         holder                      holder
   (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                 $1          $7                $5           $6                $7          $8              $8         $11
      Mortgage loans         4           4                17            9                 6           5              29          13
      Real estate           --           1                --           --                 1           2              (1)          1
  -----------------------------------------------------------------------------------------------------------------------------------
   Total                    $5         $12               $22          $15               $14         $15             $36         $25
  ===================================================================================================================================
   Non-accruals:
      Bonds                 $1         $--                $2           $5                $3          $5              $5          $8
      Mortgage loans        --          --                 3            1                (1)         --               3           1
  -----------------------------------------------------------------------------------------------------------------------------------
   Total                    $1         $--                $5           $6                $2          $5              $8          $9
  ===================================================================================================================================
  </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;  and 6) charges  associated  with the  Healthsource
  acquisition.
  
                                         18
  
  <PAGE>
  
  Part II.  OTHER INFORMATION
  
  Item 4. Submission of Matters to a Vote of Security Holders.
  
           The Annual Meeting of  Shareholders  of CIGNA  Corporation  was held on
           April 23, 1997. At the meeting,  64,353,016 shares of Common Stock were
           represented and entitled to vote, and 74,020,823 shares of Common Stock
           were  outstanding  and  entitled to vote.  CIGNA  shareholders  elected
           nominees to the Board of Directors,  ratified the  appointment of Price
           Waterhouse  LLP as independent  accountants  for 1997, and approved the
           CIGNA Executive Incentive Plan.
  
                                                                          Votes
                                               Votes For                 Withheld
                                              ----------                ---------
           Election of nominees to 
           Board of Directors  for 
           term expiring in April, 2000:
  
           Alfred C. DeCrane, Jr.              64,008,920                344,096
           Paul F. Oreffice                    64,005,024                347,992
           Wilson H. Taylor                    64,022,885                330,131
           Harold A. Wagner                    64,007,285                345,731
  
           -------------------------------
  
  
                                       Votes For     Votes Against   Abstentions
                                      ----------     -------------   -----------
           Ratification of Price
           Waterhouse LLP as
           Independent Accountants    64,232,673        41,468         78,875
  
  
           -------------------------------
  
  
                                       Votes For     Votes Against   Abstentions
                                      ----------     -------------   -----------
            Approval of the
            CIGNA Executive
            Incentive Plan            61,960,587     1,584,179        808,250
  
                                         19
  
  <PAGE>
  
  Item 6. Exhibits and Reports on Form 8-K.
  
            (a)  See Exhibit Index.
  
            (b)  During the  quarterly  period ended June 30, 1997,  and as of the
                 filing date, CIGNA filed the following Reports on Form 8-K:
  
                 o    dated April 30,  1997,  Item 5 -  containing  a news release
                      regarding its first quarter 1997 results.
  
                 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.
  
                                         20
  
  
  <PAGE>
  
  
  
                                      SIGNATURE
  
  
           Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
  the registrant has duly caused this report to be signed by the undersigned  duly
  authorized officer, on its behalf and in the capacity indicated.
  
  
  
                                                  CIGNA CORPORATION
  
  
  
                                                  By /s/ Gary A. Swords
                                                     Gary A. Swords
                                                     Vice President and
                                                     Chief Accounting Officer
  
  Date:    August 6, 1997
  
  
                                         21
  
  <PAGE>
  
                                    Exhibit Index
  
  
                                                 Method of
  Number    Description                          Filing
  
  4         Description of Preferred Stock       Filed as Item 1 and Exhibit 1
            Purchase Rights, including the       to CIGNA Corporation's Form 8-A
            Rights Agreement dated as of         Registration Statement dated
            July 23, 1997 between CIGNA          July 23, 1997 and incorporated
            Corporation and First Chicago        herein by reference.
            Trust Company of New York
  
  10        Stock Compensation Plan              Filed herewith.
            for Non-Employee Directors of
            CIGNA Corporation, as amended
            and restated effective 
            July 1, 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.
  
  
                                         22
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 92382}]
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": "97652553"}, "business-address": {"street1": "ONE LIBERTY PL 1650 MARKET ST", "street2": "P O BOX 7716", "city": "PHILADELPHIA", "state": "PA", "zip": "19192-1550", "phone": "2157616211"}}
text: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 10-Q
  
                [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
  
                    For the quarterly period ended June 30, 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 June 30,  1997,  74,014,308  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                              9
  
  PART II. OTHER INFORMATION
  
           Item 4. Submission of Matters to a Vote of
                     Security Holders                                      19
  
           Item 6. Exhibits and Reports on Form 8-K                        20
  
  SIGNATURE                                                                21
  
  EXHIBIT INDEX                                                            22
  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          Six Months Ended
                                                      June 30,                  June 30,
                                                 1997         1996         1997         1996
  ===========================================================================================
  REVENUES
  Premiums and fees                            $ 3,482      $ 3,499      $ 6,870      $ 6,889
  Net investment income                          1,062        1,111        2,115        2,194
  Other revenues                                   163          152          323          294
  Realized investment gains (losses)                12          (31)          56           (1)
                                               -------      -------      -------      -------
      Total revenues                             4,719        4,731        9,364        9,376
                                               -------      -------      -------      -------
  
  BENEFITS, LOSSES AND EXPENSES
  Benefits, losses and settlement expenses       3,065        3,129        6,074        6,273
  Policy acquisition expenses                      270          322          534          594
  Other operating expenses                         973          935        1,908        1,806
                                               -------      -------      -------      -------
      Total benefits, losses and expenses        4,308        4,386        8,516        8,673
                                               -------      -------      -------      -------
  
  INCOME BEFORE INCOME TAXES                       411          345          848          703
                                               -------      -------      -------      -------
  
  Income taxes:
      Current                                      124           36          234          112
      Deferred                                       8           78           47          122
                                               -------      -------      -------      -------
          Total taxes                              132          114          281          234
                                               -------      -------      -------      -------
  
  NET INCOME                                       279          231          567          469
  Common dividends declared                        (62)         (62)        (123)        (122)
  Retained earnings, beginning of period         5,082        4,219        4,855        4,041
  -------------------------------------------------------------------------------------------
  
  RETAINED EARNINGS, END OF PERIOD             $ 5,299      $ 4,388      $ 5,299      $ 4,388
  ---------------------------------------------==============================================
  
  EARNINGS PER SHARE                           $  3.73      $  3.00      $  7.59      $  6.10
  ---------------------------------------------==============================================
  
  DIVIDENDS DECLARED PER SHARE                 $  0.83      $  0.80      $  1.66      $  1.60
  ---------------------------------------------==============================================
  The Notes to Financial Statements are an integral part of these statements.
  
                                         1
  CIGNA  CORPORATION
  CONSOLIDATED  BALANCE  SHEETS
  (In millions, except per share amounts)
  As of         As of
                                                                              June 30,    December 31,
                                                                                1997          1996
  ==================================================================================================
  ASSETS
  Investments:
     Fixed maturities, at fair value (amortized cost, $33,198; $33,404)     $  34,470      $  34,933
     Equity securities, at fair value (cost, $594; $573)                          799            701
     Mortgage loans                                                            10,973         10,927
     Policy loans                                                               7,255          7,296
     Real estate                                                                1,040          1,102
     Other long-term investments                                                  238            255
     Short-term investments                                                       918          1,320
                                                                            ---------      ---------
         Total investments                                                     55,693         56,534
  
  Cash and cash equivalents                                                     1,689          1,287
  Accrued investment income                                                       991            890
  Premiums, accounts and notes receivable                                       4,415          4,229
  Reinsurance recoverables                                                      6,926          7,287
  Deferred policy acquisition costs                                             1,298          1,230
  Property and equipment                                                          870            802
  Deferred income taxes                                                         1,937          1,998
  Other assets                                                                    986            993
  Goodwill and other intangibles                                                2,563          1,068
  Separate account assets                                                      26,294         22,614
  --------------------------------------------------------------------------------------------------
          Total assets                                                      $ 103,662      $  98,932
  --------------------------------------------------------------------------========================
  LIABILITIES
  Contractholder deposit funds                                              $  30,046      $  29,878
  Unpaid claims and claim expenses                                             18,527         18,841
  Future policy benefits                                                       11,617         11,784
  Unearned premiums                                                             1,853          1,940
                                                                            ---------      ---------
           Total insurance and contractholder liabilities                      62,043         62,443
  Accounts payable, accrued expenses and other liabilities                      5,598          5,326
  Current income taxes                                                            134            221
  Short-term debt                                                                 735            289
  Long-term debt                                                                1,500          1,021
  Separate account liabilities                                                 26,104         22,424
  --------------------------------------------------------------------------------------------------
           Total liabilities                                                   96,114         91,724
  --------------------------------------------------------------------------------------------------
  CONTINGENCIES - NOTE 9
  
  SHAREHOLDERS' EQUITY
  Common stock (shares issued, 88)                                                 88             88
  Additional paid-in capital                                                    2,610          2,572
  Net unrealized appreciation, fixed maturities                                   433            539
  Net unrealized appreciation, equity securities                                  136             88
  Net translation of foreign currencies                                           (73)           (45)
  Retained earnings                                                             5,299          4,855
  Less treasury stock, at cost                                                   (945)          (889)
  --------------------------------------------------------------------------------------------------
           Total shareholders' equity                                           7,548          7,208
  --------------------------------------------------------------------------------------------------
           Total liabilities and shareholders' equity                       $ 103,662      $  98,932
  --------------------------------------------------------------------------========================
  SHAREHOLDERS' EQUITY PER SHARE                                            $  101.98      $   97.15
  --------------------------------------------------------------------------========================
  The Notes to Financial Statements are an integral part of these statements.
  
                                         2
  CIGNA  CORPORATION
  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
  (In millions)
  Six Months Ended June 30,
                                                                                1997        1996
  ================================================================================================
  CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                                             $   567      $   469
      Adjustments to reconcile net income to net cash
          provided by (used in) operating activities:
              Insurance liabilities, net of reinsurance recoverables             143         (140)
              Premiums, accounts and notes receivable                            (36)        (109)
              Accounts payable, accrued expenses, other liabilities and
                  current income taxes                                          (180)        (343)
              Deferred income taxes                                               47          122
              Realized investment (gains) losses                                 (56)           1
              Gain on sale of businesses and other equity interests               --          (18)
              Other, net                                                        (132)         (40)
                                                                             -------      -------
              Net cash provided by (used in) operating activities                353          (58)
                                                                             -------      -------
  
  CASH FLOWS FROM INVESTING ACTIVITIES
      Proceeds from investments sold:
          Fixed maturities                                                     3,128        3,447
          Equity securities                                                      148          218
          Mortgage loans                                                         322          265
          Other (primarily short-term investments)                             6,629        6,449
      Investment maturities and repayments:
          Fixed maturities                                                     1,974        1,992
          Mortgage loans                                                         241          357
      Investments purchased:
          Fixed maturities                                                    (4,905)      (4,528)
          Equity securities                                                     (193)        (238)
          Mortgage loans                                                        (714)        (906)
          Other (primarily short-term investments)                            (5,821)      (6,463)
      Net cash from acquisitions and dispositions                             (1,288)          66
      Other, net                                                                 (69)         (61)
                                                                             -------      -------
          Net cash provided by (used in) investing activities                   (548)         598
                                                                             -------      -------
  
  CASH FLOWS FROM FINANCING ACTIVITIES
      Deposits and interest credited to contractholder deposit funds           3,656        3,108
      Withdrawals and benefit payments from contractholder deposit funds      (3,576)      (3,570)
      Net issuance (repayment) of short-term debt                                146          (24)
      Issuance of long-term debt                                                 600           --
      Repurchase of common stock                                                 (55)         (41)
      Repayment of debt                                                          (26)          (8)
      Common dividends paid                                                     (122)        (122)
      Other, net                                                                  (3)           7
                                                                             -------      -------
         Net cash provided by (used in) financing activities                     620         (650)
                                                                             -------      -------
  Effect of foreign currency rate changes on cash and cash equivalents           (23)         (15)
  -----------------------------------------------------------------------------------------------
  Net increase (decrease) in cash and cash equivalents                           402         (125)
  Cash and cash equivalents, beginning of period                               1,287        1,559
  -----------------------------------------------------------------------------------------------
  
  Cash and cash equivalents, end of period                                   $ 1,689      $ 1,434
  ---------------------------------------------------------------------------====================
  
  Supplemental Disclosure of Cash Information:
      Income taxes paid, net of refunds                                      $   311      $   125
      Interest paid                                                          $    47      $    55
  -----------------------------------------------------------------------------------------------
  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
  
  On June 25, 1997,  CIGNA acquired  substantially  all of the outstanding  common
  stock of  Healthsource,  Inc.  (Healthsource)  for  approximately  $1.7 billion,
  including the cost of retiring  Healthsource debt of approximately  $250 million
  which is expected to occur in the third quarter.  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 effects on CIGNA's results of operations  from acquiring  Healthsource
  from the date of  acquisition  to June 30,  1997 were not  material.  Intangible
  assets and goodwill of $1.5 billion will be amortized on a  straight-line  basis
  over periods ranging from eight to 40 years.
  
  During the next several  months,  CIGNA will complete its fair value analysis of
  Healthsource's  net assets and will finalize plans for integrating  Healthsource
  with CIGNA. The effect on goodwill and net income from these  initiatives is not
  reasonably  estimable  at this time;  however,  they are not  expected to have a
  material  effect  on  CIGNA's  financial  condition  or  liquidity,   but  could
  materially affect results of operations.
  
  Healthsource's  total  revenues  were $971  million and $862 million for the six
  months  ended  June 30,  1997 and 1996,  respectively.  The pro forma  effect on
  CIGNA's  net  income for the six  months  ended  June 30,  1997 and 1996 was not
  material.
  
                                          4
  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 $242  million and $473  million for the second  quarter and six
  months of 1997,  respectively,  compared  with $221 million and $444 million for
  the same periods  last year.  Net income was $21 million and $48 million for the
  second  quarter and six months of 1997,  respectively,  compared with $5 million
  and $24 million for the same periods of 1996.
  
  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 a reinsurance arrangement, and will result in a gain on
  the sale of approximately $700 million,  a significant  portion of which 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 six 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           Six Months
                                   Ended                  Ended
                                  June 30,              June 30,
  (In millions)               1997        1996        1997       1996
  ----------------------------------------------------------------------
  Realized investment
  gains (losses):
       Fixed maturities           $3         ($14)       $29        ($3)
       Equity securities           9            1         14          9
       Mortgage loans             (1)         (18)       (14)       (20)
       Real estate                (1)          (4)        17          1
       Other                       2            4         10         12
                           ---------------------------------------------
                                  12          (31)        56         (1)
  Less income taxes
  (benefits)                       3          (10)        19          1
  ----------------------------------------------------------------------
  Net realized investment
  gains (losses)                  $9         ($21)       $37        ($2)
  -------------------------=============================================
  
  Fixed Maturities and Equity Securities
  
  Sales of  available-for-sale  fixed maturities and equity securities,  including
  policyholder share, were as follows:
  ----------------------------------------------------------------------
                                  Three Months           Six Months
                                     Ended                  Ended
                                    June 30,              June 30,
  (In millions)                1997        1996        1997       1996
  ----------------------------------------------------------------------
  Proceeds from sales         $1,689       $1,534     $3,276     $3,665
  Gross gains on sales            67           14         86         94
  Gross losses on sales          (49)         (35)       (60)       (80)
  ----------------------------------------------------------------------
  
  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 second  quarter  and six
  months  of  1997  increased  by  $209  million  and  decreased  by $58  million,
  respectively,  compared with  decreases of $102 million and $567 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           Six Months
                                     Ended                  Ended
                                    June 30,              June 30,
  (In thousands)               1997        1996        1997       1996
  ----------------------------------------------------------------------
  Weighted average
  common shares               74,740       76,821     74,664     76,854
  ----------------------------------------------------------------------
  
  There is no significant difference between earnings per share on a primary and a
  fully diluted basis.
  
  Common shares held as Treasury  shares were 13,724,063 and 11,344,351 as of June
  30, 1997 and 1996, respectively.
  
                                          5
  NOTE 6-COMMON AND PREFERRED STOCK
  
  On July 23, 1997,  CIGNA's Board of Directors  approved a new shareholder rights
  plan,  which  replaces  the plan that  expired on August 4, 1997.  Under the new
  plan, which expires on August 4, 2007,  Preferred Stock Purchase Rights (Rights)
  attach to all  outstanding  shares of CIGNA common stock.  The Rights trade with
  the stock until the Rights become  exercisable.  They are exercisable  only if a
  party  acquires,  or  announces a tender  offer to  acquire,  10% or more of the
  outstanding  common  stock,  unless  CIGNA's  Board of  Directors  approves  the
  transaction.  Each Right  entitles the  shareholder  to buy for a $780  exercise
  price 1/100 of a share of Junior Participating  Preferred Stock Series D, having
  dividend and voting  rights  approximately  equal to one share of common  stock.
  Upon  the  acquisition  of 10% or more of the  outstanding  common  stock  by an
  acquirer,  all Rights  holders  except the acquirer  may,  except under  certain
  circumstances,  purchase  shares of common stock worth twice the exercise price.
  If, after the acquisition of 10% or more of the outstanding  common stock, CIGNA
  is  acquired  in a merger  or other  business  combination  transaction,  Rights
  holders may  purchase the  acquirer's  shares at a similar  discount.  CIGNA may
  redeem the Rights for one cent each at any time before an acquirer  acquires 10%
  of its outstanding common stock, and thereafter under certain circumstances.
  
  NOTE 7-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 has completed audits of the
  years 1982 through 1990.  One issue,  which relates only to years prior to 1989,
  remains outstanding,  and it could result in an assessment of approximately $210
  million. CIGNA is contesting the assessment and believes that it should prevail.
  
  In management's opinion,  adequate tax liabilities have been established for all
  years.
  
  As of June 30, 1997, CIGNA had no tax basis operating loss carryforwards.
  
  NOTE 8-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 $716 million and
  $711  million as of June 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 second  quarter  and six months of 1997,  premiums  and fees were net of
  ceded  premiums of $589 million and $1.0 billion,  respectively.  For the second
  quarter and six months of 1996,  premiums and fees were net of ceded premiums of
  $536 million and $980 million,  respectively.  In addition, benefits, losses and
  settlement  expenses  for the second  quarter and six months of 1997 were net of
  reinsurance recoveries of $429 million and $687 million, respectively. Benefits,
  losses and  settlement  expenses  for the second  quarter and six months of 1996
  were  net  of   reinsurance   recoveries  of  $503  million  and  $771  million,
  respectively.
  
  NOTE 9-CONTINGENCIES AND OTHER MATTERS
  
  Financial Guarantees
  
  CIGNA,  through its subsidiaries,  is contingently  liable for various financial
  guarantees provided in the ordinary course of business. These include guarantees
  for the repayment of industrial  revenue bonds as well as other debt instruments
  and  guarantees  of a minimum  level of benefits  for certain  separate  account
  contracts.  Although the ultimate outcome of any loss contingencies arising from
  CIGNA's  financial  guarantees  may  adversely  affect  results of operations in
  future periods, they are not
  
                                          6
  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.  The effect of the legislation on the Individual
  Financial Services segment's income is not expected to be material through 1998.
  Beginning in 1999, the effect of the legislation is uncertain; however, it could
  have a material  adverse effect on the segment's  income.  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.
  
  Federal and state proposals have been made to place limitations on 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.
  
  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.
  
                                          7
  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.
  
  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.
  
                                          8
  Item 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations
  
  INTRODUCTION
  
  The following  discussion addresses the financial condition of CIGNA Corporation
  (CIGNA) as of June 30, 1997, compared with December 31, 1996, and its results of
  operations for the quarter and six months ended June 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  quarter  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.
  
  On June 25, 1997,  CIGNA acquired  substantially  all of the outstanding  common
  stock of  Healthsource,  Inc.  (Healthsource)  for  approximately  $1.7 billion,
  including the cost of retiring  Healthsource debt of approximately  $250 million
  which is expected to occur in the third quarter.  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 effects on CIGNA's results of operations  from acquiring  Healthsource
  from the date of  acquisition  to June 30,  1997 were not  material.  Intangible
  assets and goodwill of $1.5 billion will be amortized on a  straight-line  basis
  over periods ranging from eight to 40 years.
  
  During the next several  months,  CIGNA will complete its fair value analysis of
  Healthsource's  net assets and will finalize plans for integrating  Healthsource
  with CIGNA. The effect on goodwill and net income from these  initiatives is not
  reasonably  estimable  at this time;  however,  they are not  expected to have a
  material  effect  on  CIGNA's  financial  condition  or  liquidity,   but  could
  materially affect results of operations.
  
  Healthsource's  total  revenues  were $971  million and $862 million for the six
  months  ended  June 30,  1997 and 1996,  respectively.  The pro forma  effect on
  CIGNA's  net  income for the six  months  ended  June 30,  1997 and 1996 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     Six Months Ended
                                   June 30,              June 30,
  (In millions)                1997        1996       1997      1996
  -------------------------------------------------------------------
  Revenues                     $242        $221       $473      $444
  Operating income*             $22          $7        $44       $24
  Net income                    $21          $5        $48       $24
  ===================================================================
  
  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 a reinsurance arrangement, and will result in a gain on
  the sale of approximately $700 million,  a significant  portion of which 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  modifying  its  information  systems to ensure that they are
  capable  of  processing  information  for the year 2000 and  beyond.  Management
  expects its systems to be  compliant  for the year 2000,  and the costs of these
  efforts  are not  expected  to have a  material  effect on  CIGNA's  results  of
  operations.
  
  As a result of the planned sale of CIGNA's individual life insurance and annuity
  businesses,  Duff & Phelps Credit  Rating Co.  placed the claims paying  ability
  rating of  Connecticut  General Life Insurance  Company (AAA,  "Highest," 1st of
  18), one of CIGNA's  principal life insurance  company  subsidiaries,  on rating
  watch -- down.
  
  --------
  * Operating  income (loss) is defined as net income (loss)  excluding  after-tax
  realized investment results.
  
                                          9
  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 9 to the  Financial
  Statements.   Also,   see  Note  7  regarding  a  proposed  IRS   assessment  of
  approximately  $210 million.  CIGNA is contesting the assessment and believes it
  should prevail.
  
  CONSOLIDATED RESULTS OF OPERATIONS
  
  ===================================================================
  FINANCIAL SUMMARY        Three Months Ended    Six Months Ended
                                June 30,             June 30,
  (In millions)                 1997      1996        1997     1996
  -------------------------------------------------------------------
  Premiums and fees           $3,482    $3,499      $6,870   $6,889
  Net investment income        1,062     1,111       2,115    2,194
  Other revenues                 163       152         323      294
  Realized investment gains
  (losses)                        12       (31)         56       (1)
                          -----------------------------------------
  Total revenues               4,719     4,731       9,364    9,376
  Benefits and expenses        4,308     4,386       8,516    8,673
                          -----------------------------------------
  Income before taxes            411       345         848      703
  Income taxes                   132       114         281      234
                          -----------------------------------------
  Net income                    $279      $231        $567     $469
  ------------------------===========================================
  Realized investment gains
  (losses), net of taxes          $9      ($21)        $37      ($2)
  ------------------------===========================================
  
  CIGNA's 1997  consolidated  net income increased 21% for both the second quarter
  and six months,  compared with the same periods last year.  Operating income for
  the second  quarter and six months of 1997 was $270  million  and $530  million,
  respectively,  compared  with $252 million and $471 million for the same periods
  last year. These increases reflect improvement in most of the business segments.
  
  After-tax  realized  investment  results improved for the second quarter and six
  months  of 1997 from the same  periods  last  year.  These  increases  primarily
  reflect gains on sales of fixed  maturities and equity  securities  and, for the
  six months,  real estate. In addition,  these increases reflect lower 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.
  
  EMPLOYEE LIFE AND HEALTH BENEFITS
  
  ===================================================================
  FINANCIAL SUMMARY            Three Months Ended    Six Months Ended
                                   June 30,              June 30,
   (In millions)                1997      1996       1997       1996
  -------------------------------------------------------------------
   Premiums and fees          $2,117    $2,075     $4,220     $4,152
   Net investment income         138       143        273        287
   Other revenues                117        99        224        202
   Realized investment gains
   (losses)                        1        (7)         7         (9)
                               --------------------------------------
   Total revenues              2,373     2,310      4,724      4,632
   Benefits and expenses       2,186     2,139      4,352      4,291
                              --------------------------------------
   Income before taxes           187       171        372        341
   Income taxes                   59        54        123        114
                              --------------------------------------
   Net income                   $128      $117       $249       $227
  ----------------------------======================================
   Realized investment gains
   (losses), net of taxes         $2       ($4)        $6        ($6)
  ----------------------------======================================
  
  Net income for the Employee Life and Health  Benefits  segment  increased 9% for
  the second  quarter and 10% for the six months of 1997,  compared  with the same
  periods  last year.  Operating  income was $126 million and $243 million for the
  second  quarter  and six months of 1997,  compared  with $121  million  and $233
  million for the same periods last year.  Operating  income for the Indemnity and
  HMO operations was as follows:
  
  ===================================================================
                            Three Months Ended     Six Months Ended
                                 June 30,              June 30,
   (In millions)               1997         1996       1997      1996
  -------------------------------------------------------------------
   Indemnity operations         $68          $69       $126      $125
   HMO operations                58           52        117       108
  -------------------------------------------------------------------
   Total                       $126         $121       $243      $233
  ===================================================================
  
  Indemnity  operating  income for the second  quarter  and six months of 1997 was
  about even with the same periods last year. The second quarter and six months of
  1997 include  improvements of $8 million and $12 million,  respectively,  in the
  segment's long-term  disability (LTD) business resulting from rate increases and
  strengthened  underwriting.  Also favorably affecting these periods was improved
  group life insurance claim  experience.  Offsetting these 1997 improvements were
  unfavorable medical claim experience, higher operating expenses primarily due
  
                                         10
  to customer service initiatives,  and decreased investment income resulting from
  lower average assets and yields.
  
  HMO results  for the second  quarter  and six months of 1997  include  favorable
  after-tax adjustments of $9 million and $13 million, respectively,  from certain
  reserve  reviews  compared with $5 million for the second quarter and six months
  of 1996.  Results  for the six  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 $49 million and $104 million for the second quarter and
  six months of 1997, respectively,  compared with $47 million and $95 million for
  the same periods last year. These improvements  primarily reflect rate increases
  and membership growth,  particularly for dental HMOs, partially offset by higher
  operating expenses associated with growth and customer service initiatives.
  
  Premiums  and fees  increased  2% for both the second  quarter and six months of
  1997,  compared to the same periods last year. Growth in premiums is expected to
  continue  to be  constrained  by  competitive  pressures  in  both  the  medical
  indemnity and HMO markets.
  
  Total HMO membership  increased 7% since June 30, 1996 and 6% since December 31,
  1996, primarily reflecting  membership growth in CIGNA's HMO alternative funding
  programs.  Under these  programs,  the customer  assumes all or a portion of the
  responsibility for funding claims. CIGNA generally earns a lower margin on these
  programs than under traditional HMO plans.
  
  Management  believes  that  adding  premium  equivalents  to  premiums  and fees
  (adjusted  premiums  and fees)  produces a more  meaningful  measure of business
  volume.  Premium  equivalents for the second quarter and six months of 1997 were
  approximately $2.4 billion and $4.8 billion. These amounts represent an increase
  of 2% and a decrease of 1% compared with the same periods last year.  Generally,
  premium  equivalents for  alternative  funding  programs  reflect 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 53% and 54% of total adjusted premiums and fees for the
  six months of 1997 and 1996,  respectively.  Administrative  Services Only (ASO)
  plans  accounted for 49% of total adjusted  premiums and fees for the six months
  of 1997 and 1996.
  
  As discussed on page 9, the effects of the  Healthsource  acquisition  since the
  acquisition date were not material.
  
   EMPLOYEE RETIREMENT AND SAVINGS BENEFITS
  
  ==================================================================
   FINANCIAL SUMMARY       Three Months Ended     Six Months Ended
                                June 30,              June 30,
   (In millions)                1997      1996       1997       1996
  ------------------------------------------------------------------
   Premiums and fees             $52       $50        $98        $88
   Net investment income         397       431        799        859
   Realized investment gains
   (losses)                        2        (6)        14         10
                             ---------------------------------------
   Total revenues                451       475        911        957
   Benefits and expenses         372       415        740        806
                             ---------------------------------------
   Income before taxes            79        60        171        151
   Income taxes                   25        20         55         50
                             ---------------------------------------
   Net income                    $54       $40       $116       $101
  ---------------------------=======================================
   Realized investment gains
   (losses), net of taxes         $1       ($4)        $9         $6
  ---------------------------=======================================
  
  Net income for the Employee  Retirement and Savings Benefits  segment  increased
  35% and 15% for the second  quarter  and six months of 1997,  compared  with the
  same  periods of 1996.  Results  for the second  quarter  and six months of 1996
  include an  after-tax  charge of $8 million for  expected  state  guaranty  fund
  assessments.  Operating  income was $53 million and $107  million for the second
  quarter and six months of 1997,  compared  with $52 million and $103 million for
  the same periods last year excluding the above charge.  These increases  reflect
  higher  earnings  from an increased  asset base  primarily  in separate  account
  equity funds, which generally have lower margins than general account investment
  vehicles, partially offset by lower investment yields.
  
  Premiums and fees  increased 4% and 11% for the second quarter and six months of
  1997,  respectively,  compared  with  the  same  periods  last  year,  primarily
  reflecting higher annuity sales.
  
  Net investment  income decreased 8% and 7% for the second quarter and six months
  of 1997, respectively, compared with the same periods last year. These decreases
  primarily reflect lower investment yields and customers' continued
  
                                         11
  redirection  of a portion  of their  investments  from the  general  account  to
  separate accounts.
  
  Assets  under  management  is generally a key  determinant  of earnings for this
  segment.  For the six months ended June 30, assets under  management and related
  activity, including amounts attributable to separate accounts, were as follows:
  
  ========================================================================
   (In millions)                                      1997           1996
  ------------------------------------------------------------------------
   Balance -- January 1                            $ 40,587      $ 38,183
   Premiums and deposits                              3,598         3,068
   Investment results                                 1,200         1,360
   Increase (decrease) in fair value of assets        1,711          (422)
   Customer withdrawals                              (1,220)       (1,236)
   Other, including participant withdrawals
    and benefit payments                             (2,043)       (2,481)
  ------------------------------------------------------------------------
   Balance -- June 30                              $ 43,833      $ 38,472
  ========================================================================
  
  Premiums and deposits increased 17% in the six months of 1997, compared with the
  same  period  in 1996,  primarily  reflecting  higher  recurring  deposits  from
  existing  customers.  Sales  to new  customers  and new plan  sales to  existing
  customers  were  approximately  52% and 57% of premiums and deposits for the six
  months  of 1997 and 1996,  respectively.  The  decrease  in  investment  results
  reflects  the  absence of  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.  The
  decrease in other  compared  with 1996 is due to lower  scheduled  maturities on
  guaranteed investment contracts.
  
  Management expects asset growth to continue to be constrained due to the lack of
  growth in the defined benefit market  resulting from  customers'  preference for
  defined  contribution  products.  In  addition,  assets  under  management  will
  continue to be affected by market value  fluctuations  for fixed  maturities and
  equity securities.
  
   INDIVIDUAL FINANCIAL SERVICES
  
  =================================================================
   FINANCIAL SUMMARY       Three Months Ended    Six Months Ended
                                June 30,             June 30,
   (In millions)                1997      1996       1997      1996
  -----------------------------------------------------------------
   Premiums and fees            $249      $209       $483      $445
   Net investment income         271       271        531       523
   Other revenues                 15        21         29        38
   Realized investment gains                 
   (losses)                       (2)       (2)        11        --
                              -------------------------------------
   Total revenues                533       499      1,054     1,006
   Benefits and expenses         461       437        897       892
                              -------------------------------------
   Income before taxes            72        62        157       114
   Income taxes                   25        22         55        40
                              -------------------------------------
   Net income                    $47       $40       $102       $74
  ----------------------------=====================================
   Realized investment gains
   (losses), net of taxes        ($1)      ($2)        $7       $--
  ----------------------------=====================================
  
  Net income for the Individual  Financial  Services segment increased 18% and 38%
  for the second quarter and six months of 1997,  respectively,  compared with the
  same  periods last year.  Results for the second  quarter and six months of 1996
  include a net after-tax  charge of $3 million  resulting  from account  reviews.
  Operating  income was $48 million and $95 million for the second quarter and six
  months of 1997,  compared with $45 million and $77 million,  excluding the above
  charge,  for the same  periods  last year.  These  increases  primarily  reflect
  favorable mortality and, to a lesser extent, business growth.
  
  For the second  quarter and six months of 1997,  premiums and fees increased 19%
  and 9%,  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 leveraged  corporate-owned  life insurance
  (COLI) renewal premiums.
  
  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 $286 million and operating  income of $19 million for the six months
  of 1997 were from leveraged COLI products that are affected by this legislation.
  The effect of the legislation on the segment's  operating income is not expected
  to be material through 1998. Beginning in 1999, the effect of the legislation is
  uncertain;  however,  it could have a material  adverse  effect on the segment's
  operating  income.  CIGNA does not expect  this  legislation  to have a material
  effect  on its  consolidated  results  of  operations,  liquidity  or  financial
  condition.
  
                                         12
  A significant  portion of this  segment's  businesses are expected to be sold by
  the end of 1997. See page 9 for further discussion.
  
   PROPERTY AND CASUALTY
  
  =================================================================
   FINANCIAL SUMMARY        Three Months Ended   Six Months Ended
                                 June 30,            June 30,
   (In millions)                1997      1996       1997      1996
  -----------------------------------------------------------------
   Premiums and fees          $1,064    $1,165     $2,069    $2,204
   Net investment income         189       208        384       405
   Other revenues                 65        60        137       113
   Realized investment gains
   (losses)                       11       (13)        24        --
                             --------------------------------------
   Total revenues              1,329     1,420      2,614     2,722
   Benefits and expenses       1,238     1,345      2,428     2,579
                             --------------------------------------
   Income before taxes            91        75        186       143
   Income taxes                   25        24         55        42
                             --------------------------------------
   Net income                    $66       $51       $131      $101
  ----------------------------=====================================
   Realized investment gains
   (losses), net of taxes         $7       ($8)       $15       $--
  ----------------------------=====================================
  
  Net income for the Property and Casualty  segment  increased 29% and 30% for the
  second  quarter  and six months of 1997,  respectively,  compared  with the same
  periods last year.
  
  Operating  income was level for the second quarter and increased 15% for the six
  months of 1997, compared with the same periods in 1996. Operating income for the
  ongoing and run-off operations was as follows:
  =================================================================
                              Three Months Ended   Six Months Ended
                                    June 30,            June 30,
   (In millions)                1997      1996       1997      1996
  -----------------------------------------------------------------
   Ongoing operations:
  
     International               $36       $36        $69       $65
     Domestic                     23        20         46        32
                               ------------------------------------
       Total ongoing
         operations               59        56        115        97
   Run-off operations             --         3          1         4
  -----------------------------------------------------------------
       Total                     $59       $59       $116      $101
  =================================================================
  
  Operating  income for the second  quarter and six months ended June 30, 1997 for
  international  operations  includes  a $6  million  after-tax  charge  for  cost
  reduction   activities,   primarily   severance.   Excluding  this  charge,  the
  improvement  for the second quarter and six months of 1997 in the  international
  operations  reflects improved  international life insurance results and, for the
  six  months,  favorable  claim  experience  in the  international  property  and
  casualty operations.  Improvement in the domestic operations' results for second
  quarter  and six months  primarily  reflects  lower  catastrophes  and,  for the
  quarter,  favorable prior year  development,  partially offset by lower premiums
  and fees in 1997. Results for the international and domestic operations continue
  to reflect a highly competitive pricing environment.
  
  Premiums  and fees  declined  9% and 6% in the second  quarter and six months of
  1997, 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 $50 million
  and $70 million, respectively).  Strong growth in the international accident and
  health and, to a lesser  extent,  international  property and casualty  lines of
  business partially offset these declines.
  
  The domestic ongoing operations had pre-tax catastrophe losses of $2 million and
  $14 million, net of reinsurance,  for the second quarter and six months of 1997,
  compared  with $8  million  and  $31  million  for the  same  periods  of  1996.
  Catastrophe losses for the six months of 1996 include $18 million for East Coast
  winter storms.  The  international  operations had no catastrophe  losses in the
  second  quarter and six months of 1997 and 1996.  The effects of  reinsurance on
  catastrophe losses for the periods presented were not material.
  
  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 June 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
  
                                         13
  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 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  $6.3  billion  and $6.8
  billion  as of June 30,  1997 and  December  31,  1996,  net of  allowances  for
  unrecoverable reinsurance of $716 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 six months ended June 30:
  =================================================================
                              Three Months Ended   Six Months Ended
                                    June 30,            June 30,
   (In millions)                 1997      1996      1997      1996
  -----------------------------------------------------------------
   By business operation:
     Ongoing operations           ($7)      $17       $14       $17
     Run-off operations            47        36       100        72
  -----------------------------------------------------------------
   Total                          $40       $53      $114       $89
  =================================================================
   By type of loss:
     Asbestos-related             $27       $10       $48       $14
     Environmental pollution        8         9        14        26
     Unrecoverable
        reinsurance                 3        14         9        18
     Workers' compensation          6         7        18        19
     Other                         (4)       13        25        12
  -----------------------------------------------------------------
   Total                          $40       $53      $114       $89
  =================================================================
  
  The favorable  effect on Other prior year development for the second quarter was
  primarily  attributable  to the commercial  package line of business,  while the
  unfavorable development for the six months of 1997 was primarily attributable to
  development on assumed reinsurance, commercial fire 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 $16  million and $31 million for the second
  quarter and six months  ended June 30,  1997,  respectively,  compared  with net
  losses of $17 million and $34 million for the same  periods in 1996.  Net losses
  included after-tax  realized  investment losses of $3 million and $2 million for
  the second  quarter and six months of 1996.  There were no  realized  investment
  gains or losses for the second quarter and six months ended June 30, 1997.
  
                                         14
  LIQUIDITY AND CAPITAL RESOURCES
  
  Liquidity  for CIGNA  and its  insurance  subsidiaries  has  remained  strong as
  evidenced by  significant  amounts of short-term  investments  and cash and cash
  equivalents   in  the  aggregate.   Generally,   CIGNA  has  met  its  operating
  requirements  by maintaining  appropriate  levels of liquidity in its investment
  portfolio and through utilization of overall positive cash flows.
  
  For the six months of 1997,  cash and cash  equivalents  increased  $402 million
  from $1.3 billion as of December 31, 1996. The increase  primarily reflects cash
  provided by operating  activities  ($353 million),  reflecting  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  ($146
  million).  The  increase  in cash  flows  was  partially  offset by cash used in
  investing activities ($548 million,  which includes the $1.3 billion acquisition
  of  Healthsource  partially  offset by net  investment  sales) and  payments  of
  dividends  on  and  repurchases  of  CIGNA  common  stock  ($177  million).  For
  additional  information  regarding the funding of the Healthsource  acquisition,
  see page 9.
  
  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 June 30, 1997,  compared
  with $1.02  billion at December  31,  1996.  This  increase  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 June 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 June 30, 1997, CIGNA's short-term debt amounted to $735 million,  an increase
  of $446 million from December 31, 1996. The increase  includes the assumption of
  debt from  Healthsource of  approximately  $250 million,  which CIGNA expects to
  repay in the third quarter.
  
  In April 1996, CIGNA's Board of Directors  authorized the purchase of up to $500
  million of its common  stock,  depending on  prevailing  market  conditions  and
  alternative  uses of  capital.  Under  this  authorization,  approximately  $350
  million,  or 2.8 million  shares,  of common stock were purchased as of June 30,
  1997. Shares were purchased with internal funds. As a result of the Healthsource
  acquisition, CIGNA suspended stock repurchases. However, CIGNA expects to resume
  the  repurchase  program  due to the  agreement  to  sell  its  individual  life
  insurance and annuity businesses.
  
   INVESTMENT ASSETS
  
  ===================================================================
                                        June 30,        December 31,
   (In millions)                            1997                1996
  ------------------------------------------------------------------
   Fixed maturities                      $34,470             $34,933
   Equity securities                         799                 701
   Mortgage loans                         10,973              10,927
   Real estate                             1,040               1,102
   Other, primarily policy loans           8,411               8,871
  -------------------------------------------------------------------
   Total investment assets               $55,693             $56,534
  ===================================================================
  
  Additional information regarding CIGNA's investment assets is included in Note 4
  to the second 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:
  
  ===================================================================
                                           June 30,     December 31,
                                               1997             1996
  -------------------------------------------------------------------
   Fixed maturities                             29%              28%
   Mortgage loans                               54%              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.
  
                                         15
  As of June 30, 1997 and December 31, 1996,  the fair value of fixed  maturities,
  including  policyholder  share,  was greater than amortized cost by $1.3 billion
  and  $1.5  billion,   respectively.  The  decrease  in  unrealized  appreciation
  primarily  reflects  the upward  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 $78 million of potential problem bonds, including amounts attributable
  to policyholder contracts, as of June 30, 1997, compared with $107 million as of
  December  31,  1996.  These  amounts  are net of $7  million  and $5  million of
  cumulative write-downs, respectively.
  
       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 June
  30, 1997 and December  31,  1996,  CIGNA had problem  bonds,  including  amounts
  attributable to policyholder contracts, of $192 million and $160 million, net of
  related cumulative write-downs of $75 million and $125 million, respectively.
  
       Cumulative Write-Downs for Bonds
  
  CIGNA had cumulative  write-downs  for bonds as of June 30, 1997 and 1996 of $83
  million and $156  million,  respectively,  including $25 million and $55 million
  attributable to policyholder contracts.  Also, cumulative write-downs as of June
  30, 1997 and 1996 included $1 million and $2 million, respectively, for bonds no
  longer classified as problem or potential problem bonds.
  
  During the six months of 1997 and 1996,  CIGNA  established  write-downs  of $19
  million and $25 million,  respectively, for problem and potential problem bonds.
  These amounts  included $7 million and $8 million,  attributable to policyholder
  contracts, for the six months of 1997 and 1996, respectively. See the Summary on
  page 18 for the adverse 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 adverse effect of  non-accruals  for bonds on
  policyholder contracts and on CIGNA's net income.
  
  Mortgage Loans
  ===================================================================
                                         June 30,       December 31,
                                             1997               1996
  -------------------------------------------------------------------
   Mortgage loans (in millions)           $10,973            $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 six months of 1997,  $505 million of mortgage loans were scheduled to
  mature,  of which $204 million were paid in full,  $103 million were extended at
  existing  loan rates for a weighted  average of ten months and $69 million  were
  refinanced at current market rates.  Mortgage loan  extensions and  refinancings
  are loans in good standing.  The remaining scheduled  maturities of $129 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.
  
                                         16
  CIGNA had potential problem mortgage loans,  including  amounts  attributable to
  policyholder contracts, of $290 million as of June 30, 1997, and $384 million as
  of December 31, 1996, net of related  valuation  reserves of $33 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 June 30, 1997,  restructured mortgage loans with
  a carrying value of $225 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  10.30% as of
  June 30, 1997.
  
  CIGNA had problem mortgage loans, including amounts attributable to policyholder
  contracts,  of $284 million and $363 million,  net of valuation  reserves of $33
  million  and  $71  million,   as  of  June  30,  1997  and  December  31,  1996,
  respectively.
  
       Valuation Reserves for Mortgage Loans
  
  CIGNA had valuation reserves for mortgage loans at June 30, 1997 and 1996 of $66
  million and $121  million,  respectively,  including $43 million and $78 million
  attributable to policyholder contracts.
  
  During the six months of 1997 and 1996, CIGNA established  valuation reserves of
  $13 million and $49 million,  respectively,  for problem and  potential  problem
  mortgage loans.  These amounts included $6 million and $29 million  attributable
  to policyholder contracts.
  
  See the  Summary on page 18 for the  adverse  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 adverse effect of non-accruals for
  mortgage loans on policyholder contracts and on CIGNA's net income.
  
  Real Estate
  
  As of June 30, 1997 and  December  31,  1996,  investment  real  estate,  net of
  reserves  and  write-downs,   included:   1)  $469  million  and  $495  million,
  respectively,  of real estate  held for the  production  of income,  and 2) $571
  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 at June
  30, 1997 and 1996 of $321 million and $394 million, respectively, including $175
  million and $200 million attributable to policyholder contracts.
  
  See the Summary on page 18 for the adverse 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 June 30,                                 Six Months Ended June 30,
                      --------------------------------------------------------------------------------------------------------------
                                1997                          1996                          1997                       1996
                      ----------------------        ----------------------         ----------------------     ----------------------
                        Policy-                       Policy-                        Policy-                     Policy-
                         holder                        holder                         holder                      holder
   (In millions)      Contracts       CIGNA         Contracts        CIGNA         Contracts       CIGNA       Contracts       CIGNA
  -----------------------------------------------------------------------------------------------------------------------------------
  Write-downs and
   valuation
   reserves:
      Bonds                 $1          $7                $5           $6                $7          $8              $8         $11
      Mortgage loans         4           4                17            9                 6           5              29          13
      Real estate           --           1                --           --                 1           2              (1)          1
  -----------------------------------------------------------------------------------------------------------------------------------
   Total                    $5         $12               $22          $15               $14         $15             $36         $25
  ===================================================================================================================================
   Non-accruals:
      Bonds                 $1         $--                $2           $5                $3          $5              $5          $8
      Mortgage loans        --          --                 3            1                (1)         --               3           1
  -----------------------------------------------------------------------------------------------------------------------------------
   Total                    $1         $--                $5           $6                $2          $5              $8          $9
  ===================================================================================================================================
  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;  and 6) charges  associated  with the  Healthsource
  acquisition.
  
                                         18
  Part II.  OTHER INFORMATION
  
  Item 4. Submission of Matters to a Vote of Security Holders.
  
           The Annual Meeting of  Shareholders  of CIGNA  Corporation  was held on
           April 23, 1997. At the meeting,  64,353,016 shares of Common Stock were
           represented and entitled to vote, and 74,020,823 shares of Common Stock
           were  outstanding  and  entitled to vote.  CIGNA  shareholders  elected
           nominees to the Board of Directors,  ratified the  appointment of Price
           Waterhouse  LLP as independent  accountants  for 1997, and approved the
           CIGNA Executive Incentive Plan.
  
                                                                          Votes
                                               Votes For                 Withheld
                                              ----------                ---------
           Election of nominees to 
           Board of Directors  for 
           term expiring in April, 2000:
  
           Alfred C. DeCrane, Jr.              64,008,920                344,096
           Paul F. Oreffice                    64,005,024                347,992
           Wilson H. Taylor                    64,022,885                330,131
           Harold A. Wagner                    64,007,285                345,731
  
           -------------------------------
  
                                       Votes For     Votes Against   Abstentions
                                      ----------     -------------   -----------
           Ratification of Price
           Waterhouse LLP as
           Independent Accountants    64,232,673        41,468         78,875
  
           -------------------------------
  
                                       Votes For     Votes Against   Abstentions
                                      ----------     -------------   -----------
            Approval of the
            CIGNA Executive
            Incentive Plan            61,960,587     1,584,179        808,250
  
                                         19
  Item 6. Exhibits and Reports on Form 8-K.
  
            (a)  See Exhibit Index.
  
            (b)  During the  quarterly  period ended June 30, 1997,  and as of the
                 filing date, CIGNA filed the following Reports on Form 8-K:
  
                 o    dated April 30,  1997,  Item 5 -  containing  a news release
                      regarding its first quarter 1997 results.
  
                 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.
  
                                         20
  SIGNATURE
  
           Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
  the registrant has duly caused this report to be signed by the undersigned  duly
  authorized officer, on its behalf and in the capacity indicated.
  
                                                  CIGNA CORPORATION
  
                                                  By /s/ Gary A. Swords
                                                     Gary A. Swords
                                                     Vice President and
                                                     Chief Accounting Officer
  
  Date:    August 6, 1997
  
                                         21
  Exhibit Index
  
                                                 Method of
  Number    Description                          Filing
  
  4         Description of Preferred Stock       Filed as Item 1 and Exhibit 1
            Purchase Rights, including the       to CIGNA Corporation's Form 8-A
            Rights Agreement dated as of         Registration Statement dated
            July 23, 1997 between CIGNA          July 23, 1997 and incorporated
            Corporation and First Chicago        herein by reference.
            Trust Company of New York
  
  10        Stock Compensation Plan              Filed herewith.
            for Non-Employee Directors of
            CIGNA Corporation, as amended
            and restated effective 
            July 1, 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.
  
                                         22