Consolidated Statements of Inco
Consolidated Statements of Income (USD $) | |||||||||||||||||||
In Millions, except Per Share data | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 | ||||||||||||||||
Revenue: | |||||||||||||||||||
Health care premiums | 28243.8 | 25507.3 | 21500.1 | ||||||||||||||||
Other premiums | 1892.4 | 1876.8 | 1979.3 | ||||||||||||||||
Fees and other revenue (1) | 3536.5 | [1] | 3312.5 | [1] | 3,044 | [1] | |||||||||||||
Net investment income | 1036.4 | 910 | 1149.9 | ||||||||||||||||
Net realized capital gains (losses) | 55 | -655.9 | -73.7 | ||||||||||||||||
Total revenue | 34764.1 | 30950.7 | 27599.6 | ||||||||||||||||
Benefits and expenses: | |||||||||||||||||||
Health care costs (2) | 24061.2 | [2] | 20785.5 | [2] | 17294.8 | [2] | |||||||||||||
Current and future benefits | 2078.1 | 1938.7 | 2248.1 | ||||||||||||||||
Operating expenses | |||||||||||||||||||
Selling expenses | 1251.9 | 1149.6 | 1060.9 | ||||||||||||||||
General and administrative expenses | 5131.1 | 4601.9 | 3985.5 | ||||||||||||||||
Total operating expenses | 6,383 | 5751.5 | 5046.4 | ||||||||||||||||
Interest expense | 243.4 | 236.4 | 180.6 | ||||||||||||||||
Amortization of other acquired intangible assets | 97.2 | 108.2 | 97.6 | ||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | 0 | -43.8 | -64.3 | ||||||||||||||||
Total benefits and expenses | 32862.9 | 28776.5 | 24803.2 | ||||||||||||||||
Income Before Income Taxes | 1901.2 | 2174.2 | 2796.4 | ||||||||||||||||
Income taxes: | |||||||||||||||||||
Total income taxes | 624.7 | 790.1 | 965.4 | ||||||||||||||||
Net income | 1276.5 | 1384.1 | $1,831 | ||||||||||||||||
Earnings per common share: | |||||||||||||||||||
Basic | 2.89 | 2.91 | 3.6 | ||||||||||||||||
Diluted | 2.84 | 2.83 | 3.47 | ||||||||||||||||
[1]Fees and other revenue include administrative services contract member co-payments and plan sponsor reimbursements related to our mail order and specialty pharmacy operations of $81 million, $60 million and $52 million (net of pharmaceutical and processing costs of $1.6 billion, $1.6 billion and $1.4 billion) for 2009, 2008 and 2007, respectively. | |||||||||||||||||||
[2]Health care costs have been reduced by fully insured member co-payments revenue related to our mail order and specialty pharmacy operations of $122 million, $111 million and $102 million for 2009, 2008 and 2007, respectively. |
Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | ||
In Millions | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 |
Current assets: | ||
Cash and cash equivalents | 1203.6 | 1179.5 |
Investments | 2922.7 | 706 |
Premiums receivable, net | 630.4 | 616.4 |
Other receivables, net | 626.7 | 554.3 |
Accrued investment income | 209.2 | 193.6 |
Collateral received under securities loan agreements | 210 | 749.6 |
Income taxes receivable | 89.5 | 164.9 |
Deferred income taxes | 383.4 | 301.5 |
Other current assets | 551.4 | 452.6 |
Total current assets | 6826.9 | 4918.4 |
Long-term investments | 17051.1 | 16163.4 |
Reinsurance recoverables | 986.9 | 1010.3 |
Goodwill | 5146.2 | 5085.6 |
Other acquired intangible assets, net | 590.7 | 667.4 |
Property and equipment, net | 551 | 467.5 |
Deferred income taxes | 333.4 | 778.7 |
Other long-term assets | 781.1 | 841.3 |
Separate Accounts assets | 6283.1 | 5919.9 |
Total assets | 38550.4 | 35852.5 |
Current liabilities: | ||
Health care costs payable | 2895.3 | 2393.2 |
Future policy benefits | 739.6 | 759.7 |
Unpaid claims | 559.5 | 559.8 |
Unearned premiums | 306.4 | 238.6 |
Policyholders' funds | 788.3 | 754.4 |
Collateral payable under securities loan agreements | 210 | 749.6 |
Short-term debt | 480.8 | 215.7 |
Accrued expenses and other current liabilities | 2484.3 | 1883.8 |
Total current liabilities | 8464.2 | 7554.8 |
Future policy benefits | 6470.1 | 6765.4 |
Unpaid claims | 1,453 | 1271.2 |
Policyholders' funds | 1294.1 | 1171.7 |
Long-term debt | 3639.5 | 3638.3 |
Other long-term liabilities | 1442.6 | 1344.8 |
Separate Accounts liabilities | 6283.1 | 5919.9 |
Total liabilities | 29046.6 | 27666.1 |
Commitments and contingencies (Note 18) | -- | -- |
Shareholders' equity: | ||
Common stock ($.01 par value; 2.7 billion shares authorized; 430.8 million and 456.3 million shares issued and outstanding in 2009 and 2008, respectively) and additional paid-in capital | 470.1 | 351.2 |
Retained earnings | 10256.7 | 9716.5 |
Accumulated other comprehensive loss | (1,223) | -1881.3 |
Total shareholders' equity | 9503.8 | 8186.4 |
Total liabilities and shareholders' equity | 38550.4 | 35852.5 |
Parenthetical Data For Consolid
Parenthetical Data For Consolidated Balance Sheets (USD $) | ||
Dec. 31, 2009
| Dec. 31, 2008
| |
Parenthetical Data For Consolidated Balance Sheets | ||
Common Stock, par value | 0.01 | 0.01 |
Common Stock, shares authorized | 2,700,000,000 | 2,700,000,000 |
Common Stock, shares issued and outstanding | 430,800,000 | 456,300,000 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity (USD $) | ||||||
In Millions | Common Stock Outstanding [Member]
| Common Stock And Additional Paid In Capital [Member]
| Retained Earnings [Member]
| Accumulated Other Comprehensive Loss
| Comprehensive Income [Member]
| Total
|
Beginning balance (in shares) at Dec. 31, 2006 | 516 | |||||
Beginning balance at Dec. 31, 2006 | 366.2 | 9404.6 | -625.7 | $0 | 9145.1 | |
Cumulative effect of adopting new accounting standards (Note 2) | (1) | 113.9 | 112.9 | |||
Beginning balance as of January 1, 2007, as adjusted | 366.2 | 9403.6 | -511.8 | 9,258 | ||
Beginning balance as of January 1, 2007, as adjusted (in shares) | 516 | |||||
Comprehensive income: | ||||||
Net income | 1,831 | 1,831 | 1,831 | |||
Other comprehensive income (loss) (Note 9): | ||||||
Net unrealized gains (losses) on securities | -13.2 | -13.2 | ||||
Net foreign currency and derivative gains (losses) | -12.2 | -12.2 | ||||
Pension and OPEB plans | 248.8 | 248.8 | ||||
Other comprehensive income (losses) | 223.4 | 223.4 | 223.4 | |||
Total comprehensive income | 2054.4 | |||||
Common shares issued for benefit plans, including tax benefits | 415 | 415 | ||||
Common shares issued for benefit plans, including tax benefits (in shares) | 13.5 | |||||
Repurchases of common shares | -592.4 | -1076.6 | (1,669) | |||
Repurchases of common shares (in shares) | -33.2 | |||||
Dividends declared ($.04 per share) | (20) | (20) | ||||
Ending balance at Dec. 31, 2007 | 188.8 | 10,138 | -288.4 | 0 | 10038.4 | |
Ending balance (in shares) at Dec. 31, 2007 | 496.3 | |||||
Comprehensive income: | ||||||
Net income | 1384.1 | 1384.1 | 1384.1 | |||
Other comprehensive income (loss) (Note 9): | ||||||
Net unrealized gains (losses) on securities | -282.6 | -282.6 | ||||
Net foreign currency and derivative gains (losses) | -15.7 | -15.7 | ||||
Pension and OPEB plans | -1294.6 | -1294.6 | ||||
Other comprehensive income (losses) | -1592.9 | -1592.9 | -1592.9 | |||
Total comprehensive income | -208.8 | |||||
Common shares issued for benefit plans, including tax benefits | 162.9 | 162.9 | ||||
Common shares issued for benefit plans, including tax benefits (in shares) | 2.9 | |||||
Repurchases of common shares | -0.5 | -1787.2 | -1787.7 | |||
Repurchases of common shares (in shares) | -42.9 | |||||
Dividends declared ($.04 per share) | -18.4 | -18.4 | ||||
Ending balance at Dec. 31, 2008 | 351.2 | 9716.5 | -1881.3 | 0 | 8186.4 | |
Ending balance (in shares) at Dec. 31, 2008 | 456.3 | |||||
Cumulative effect of adopting new accounting standard at April 1, 2009 (Note 2) | 53.7 | -53.7 | 0 | |||
Comprehensive income: | ||||||
Net income | 1276.5 | 1276.5 | 1276.5 | |||
Other comprehensive income (loss) (Note 9): | ||||||
Net unrealized gains (losses) on securities | 619 | 619 | ||||
Net foreign currency and derivative gains (losses) | 34 | 34 | ||||
Pension and OPEB plans | 59 | 59 | ||||
Other comprehensive income (losses) | 712 | 712 | 712 | |||
Total comprehensive income | 1988.5 | |||||
Common shares issued for benefit plans, including tax benefits | 119.2 | 119.2 | ||||
Common shares issued for benefit plans, including tax benefits (in shares) | 3.4 | |||||
Repurchases of common shares | -0.3 | -772.7 | (773) | |||
Repurchases of common shares (in shares) | -28.9 | |||||
Dividends declared ($.04 per share) | -17.3 | -17.3 | ||||
Ending balance at Dec. 31, 2009 | 470.1 | 10256.7 | ($1,223) | $0 | 9503.8 | |
Ending balance (in shares) at Dec. 31, 2009 | 430.8 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (USD $) | |||
In Millions | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Cash Flows From Operating Activities | |||
Net income | 1276.5 | 1384.1 | $1,831 |
Adjustments to Reconcile Net Income To Net Cash Provided By Operating Activities | |||
Net realized capital (gains) losses | (55) | 655.9 | 73.7 |
Depreciation and amortization | 416 | 378.3 | 321.5 |
Equity in earnings of affiliates, net | -15.7 | 159.1 | -88.3 |
Stock-based compensation expense | 90.7 | 95.7 | 89.4 |
(Accretion) amortization of net investment (discount) premium | (67) | -15.2 | 3.6 |
Changes In Assets And Liabilities | |||
Accrued investment income | -15.6 | -4.4 | -6.1 |
Premiums due and other receivables | -53.7 | -106.2 | -91.7 |
Income taxes | -14.4 | -137.5 | 28.8 |
Other assets and other liabilities | 570.4 | -116.3 | (119) |
Health care and insurance liabilities | 357.6 | -82.1 | 23.8 |
Other, net | -1.5 | -4.5 | -1.2 |
Net cash provided by operating activities | 2488.3 | 2206.9 | 2065.5 |
Cash Flows From Investing Activities | |||
Proceeds from sales and maturities of investments | 10029.6 | 11681.2 | 10,577 |
Cost of investments | -11592.2 | -12307.9 | -10642.2 |
Increase in property, equipment and software | (362) | -446.6 | -400.4 |
Cash used for acquisition, net of cash acquired | -75.1 | 0 | -572.2 |
Net cash used for investing activities | -1999.7 | -1073.3 | -1037.8 |
Cash Flows From Financing Activities | |||
Proceeds from issuance of long-term debt, net of issuance costs | 0 | 484.8 | 663.9 |
Net issuance of short-term debt | 266.1 | 85.6 | 85.5 |
Deposits and interest credited for investment contracts | 7.1 | 8.5 | 9.7 |
Withdrawals of investment contracts | (9) | -38.4 | -21.2 |
Common shares issued under benefit plans | 14.8 | 29.7 | 170.8 |
Stock-based compensation tax benefits | 5.1 | 27.8 | 153.2 |
Common shares repurchased | (773) | -1787.7 | -1695.6 |
Dividends paid to shareholders | -17.3 | -18.4 | (20) |
Collateral received on interest rate swaps | 41.7 | 0 | 0 |
Net cash used for financing activities | -464.5 | -1208.1 | -653.7 |
Net increase (decrease) in cash and cash equivalents | 24.1 | -74.5 | 374 |
Cash and cash equivalents, beginning of period | 1179.5 | 1,254 | 880 |
Cash and cash equivalents, end of period | 1203.6 | 1179.5 | $1,254 |
1. Organization
1. Organization | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Organization | 1. Organization We conduct our operations in three business segments: Health Care consists of medical, pharmacy benefits management, dental and vision plans offered on both an Insured basis (where we assume all or a majority of the risk for medical and dental care costs) and an employer-funded basis (where the plan sponsor under an administrative services contract (ASC) assumes all or a majority of this risk).Medical products include point-of-service (POS), preferred provider organization (PPO), health maintenance organization (HMO) and indemnity benefit plans.Medical products also include health savings accounts (HSAs) and Aetna HealthFund, consumer-directed health plans that combine traditional POS or PPO and/or dental coverage, subject to a deductible, with an accumulating benefit account (which may be funded by the plan sponsor and/or the member in the case of HSAs).We also offer Medicare and Medicaid products and services and specialty products, such as medical management and data analytics services, behavioral health plans and stop loss insurance, as well as products that provide access to our provider network in select markets. Group Insurance primarily includes group life insurance products offered on an Insured basis, including basic and supplemental group term life, group universal life, supplemental or voluntary programs and accidental death and dismemberment coverage.Group Insurance also includes (i) group disability products offered to employers on both an Insured and an ASC basis which consist primarily of short-term and long-term disability insurance, (ii) absence management services offered to employers, which include short-term and long-term disability administration and leave management, and (iii) long-term care products that were offered primarily on an Insured basis, which provide benefits covering the cost of care in private home settings, adult day care, assisted living or nursing facilities.We no longer solicit or accept new long-term care customers, and we are working with our customers on an orderly transition of this product to other carriers. Large Case Pensions manages a variety of retirement products (including pension and annuity products) primarily for tax qualified pension plans.These products provide a variety of funding and benefit payment distribution options and other services.Large Case Pensions also includes certain discontinued products (refer to Note 20 beginning on page 82 for additional information). Our three business segments are distinct businesses that offer different products and services.Our Chief Executive Officer evaluates financial performance and makes resource allocation decisions at these segment levels.The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2, below.We evaluate the performance of these business segments based on operating earnings (net income or loss, excluding net realized capital gains and losses and certain other items) (refer to Note 19 beginning on page 80 for segment financial information). |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Summary Of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include the accounts of Aetna and the subsidiaries that we control.All significant intercompany balances have been eliminated in consolidation.The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined there were no other items to disclose. Reclassifications Certain reclassifications were made to the 2008 financial information to conform to the 2009 presentation. New Accounting Standards Recognition and Presentation of Other-Than-Temporary Impairments Effective April 1, 2009, we adopted new accounting guidance issued by the Financial Accounting Standards Board (FASB) for other-than-temporary impairments (OTTI) of debt securities.This guidance establishes new criteria for the recognition of OTTI on debt securities and also requires additional financial statement disclosure.The new criteria require OTTI to be recognized if either a credit-related loss is deemed to have occurred or we have the intention to sell a security that is in an unrealized loss position.Refer to Notes 8 and 9 beginning on pages 58 and 62, respectively. Upon adoption of this new guidance, we evaluated securities held at April 1, 2009 for which a previous OTTI was recognized, and identified those securities that we did not intend to sell.As a result of this analysis, we recorded a $54 million ($83 million pretax) cumulative effect adjustment that increased retained earnings and accumulated other comprehensive loss as of April 1, 2009. Fair Value Measurements Assessing Fair Value in Market Conditions That Are Not Orderly In April 2009, the FASB released updates to the accounting guidance for measuring the fair value of assets and liabilities. These updates provide clarification as to how to determine the fair value of assets and liabilities in distressed economic conditions and also require greater disaggregation of debt and equity securities within our fair value measurements disclosures (refer to Note 10 beginning on page 63).This accounting guidance was effective on June 30, 2009 and did not impact our financial position or results of operations. Codification In June 2009, the FASB released FASB Accounting Standards CodificationTM (Codification).Beginning in September 2009, all existing accounting standard documents were superseded, and Codification became the single source of authoritative GAAP.Codification did not resultin any change in our significant accounting policies. Cumulative Effect of New Accounting Standards in 2007 Effective January 1, 2007, we changed the measurement date of our defined benefit pension and other postretirement plans in accordance with a new accounting standard issued by the FASB.This change resulted in a cumulative effect adjustment to the opening balance of shareholders equity at January 1, 2007 comprised of a $4 million increase to retained earnings and a $114 million decrease to accumulated other |
3. Acquisition
3. Acquisition | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Acquisition | 3. Acquisition During 2009 we acquired Horizon Behavioral Services, LLC (Horizon), a leading provider of employee assistance programs, for approximately $70 million in available cash.We believe this acquisition will enhance our existing product capabilities and future growth opportunities.We recorded goodwill related to this transaction of approximately $57 million in 2009 (pending the final allocation of purchase price).Of this goodwill amount, $36 million will be tax deductible.All of the goodwill related to this acquisition was assigned to our Health Care segment.Refer to Note 7on page 57 for additional information. |
4. Earnings Per Share
4. Earnings Per Share | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Earnings Per Share | 4. Earnings Per Common Share Basic earnings per share (EPS) is computed by dividing net income (i.e., the numerator) by the weighted average number of common shares outstanding (i.e., the denominator) during the reporting period.Diluted EPS is computed in a similar manner, except that the weighted average number of common shares outstanding is adjusted for the dilutive effects of stock options, stock appreciation rights (SARs) and other dilutive financial instruments, but only in the periods in which such effect is dilutive. The computations of basic and diluted EPS for 2009, 2008 and 2007 were as follows: (Millions, except per common share data) 2009 2008 2007 Net Income $ 1,276.5 $ 1,384.1 $ 1,831.0 Weighted average shares used to compute basic EPS 441.1 475.5 509.2 Dilutive effect of outstanding stock-based compensation awards (1) 8.4 12.8 17.8 Weighted average shares used to compute diluted EPS 449.5 488.3 527.0 Basic EPS $ 2.89 $ 2.91 $ 3.60 Diluted EPS $ 2.84 $ 2.83 $ 3.47 (1) Approximately 19.3 million, 9.7 million and 2.6 million SARs (with exercise prices ranging from $25.94 to $59.76, $25.94 to $59.76, and $44.22 to $59.76, respectively) were not included in the calculation of diluted EPS for 2009, 2008 and 2007, respectively, and approximately 6.2 million and 1.6 million stock options (with exercise prices ranging from $33.38 to $42.35) were not included in the calculation of diluted EPS for 2009 and 2008, respectively, as their exercise prices were greater than the average market price of Aetna common shares during such periods. |
5. Operating Expenses
5. Operating Expenses | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Operating Expense | 5. Operating Expenses For 2009, 2008 and 2007, selling expenses (which include broker commissions, the variable component of our internal sales force compensation and premium taxes) and general and administrative expenses were as follows: (Millions) 2009 2008 2007 Selling expenses $ 1,251.9 $ 1,149.6 $ 1,060.9 General and administrative expenses: Salaries and related benefits 2,971.8 2,619.8 2,343.6 Other general and administrative expenses (1) 2,159.3 1,982.1 1,641.9 Total general and administrative expenses (2) 5,131.1 4,601.9 3,985.5 Total operating expenses $ 6,383.0 $ 5,751.5 $ 5,046.4 (1) Includes the following for 2009:litigation-related insurance proceeds of $38.2 million.Includes the following charges for 2008:a $20.0 million contribution for the establishment of an out-of-network pricing database and a $42.2 million allowance on a reinsurance recoverable.Refer to the reconciliation of operating earnings to net income in Note 19 beginning on page 81 for additional information. (2) In 2009 and 2008, we recorded severance and facility charges of $93.7 million and $54.7 million, respectively.The 2009 severance and facility charges related to actions taken or committed to be taken by the end of the first quarter of 2010.These charges are reflected in total general and administrative expenses.Refer to the reconciliation of operating earnings to net income in Note 19 beginning on page 81 for additional information. |
6. Health Care Costs Payable
6. Health Care Costs Payable | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Health Care Costs Payable | 6. Health Care Costs Payable The following table shows the components of the change in health care costs payable during 2009, 2008 and 2007: (Millions) 2009 2008 2007 Health care costs payable, beginning of the period $ 2,393.2 $ 2,177.4 $ 1,927.5 Less: Reinsurance recoverables 2.0 2.9 3.7 Health care costs payable, beginning of the period - net 2,391.2 2,174.5 1,923.8 Acquisition of businesses 1.1 - 58.1 Add: Components of incurred health care costs Current year 24,127.2 20,948.5 17,472.0 Prior years (66.0 ) (163.0 ) (177.2 ) Total incurred health care costs 24,061.2 20,785.5 17,294.8 Less: Claims paid Current year 21,401.1 18,726.4 15,528.5 Prior years 2,159.0 1,842.4 1,573.7 Total claims paid 23,560.1 20,568.8 17,102.2 Health care costs payable, end of period - net 2,893.4 2,391.2 2,174.5 Add: Reinsurance recoverables 1.9 2.0 2.9 Health care costs payable, end of the period $ 2,895.3 $ 2,393.2 $ 2,177.4 Our prior year estimates of health care costs payable decreased by approximately $66 million, $163 million and $177 million in 2009, 2008 and 2007, respectively, resulting from claims being settled for amounts less than originally estimated.This reduction was primarily the result of lower than expected health care cost trends as well as the actual claim submission time being faster than we assumed in establishing our health care costs payable in the prior year.This reduction was offset by current period health care costs when we established our estimate of current year health care costs payable.When significant decreases (increases) in prior period health care cost estimates occur that we believe significantly impact our current period results of operations, we disclose that amount as favorable (unfavorable) development of prior period health care cost estimates.In 2009, we had approximately $116 million of unfavorable development of prior year health care cost estimates that was driven by what we believe was unusually high paid claims activity in the first half of 2009 related to the second half of 2008.This unfavorable development of prior year health care cost estimates offset the amount of the 2009 reduction in our estimate of health care costs payable for prior years.We had no significant amount of favorable (unfavorable) development of prior year health care cost estimates that affected our results of operations in 2008 and 2007. |
7. Goodwill and Other Acquired
7. Goodwill and Other Acquired Intangible Assets | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Goodwill and Other Acquired Intangible Assets | 7. Goodwill and Other Acquired Intangible Assets As a result of recent acquisitions, in accordance with applicable accounting guidance, we allocated the amount paid to the fair value of the net assets acquired, with any excess amounts recorded as goodwill.The increase in goodwill in 2009 and 2008 was as follows: (Millions) 2009 2008 Balance, beginning of the period $ 5,085.6 $ 5,081.0 Goodwill acquired: Horizon (1) 56.8 - Schaller Anderson 3.8 1.0 Goodhealth - 3.6 Balance, end of the period (2) $ 5,146.2 $ 5,085.6 (1) Goodwill related to the acquisition of Horizon is considered preliminary, pending the final allocation of purchase price.(Refer to Note 3 on page 55 for additional information). (2) Approximately $5.0 billion and $104 million of goodwill was assigned to the Health Care and Group Insurance segments, respectively, at both December 31, 2009 and 2008. Other acquired intangible assets at December 31, 2009 and 2008 were comprised of the following: Accumulated Amortization (Millions) Cost Amortization Net Balance Period (Years) 2009 Other acquired intangible assets: Provider networks $ 703.2 $ 369.0 $ 334.2 12-25 (2) Customer lists 399.9 205.7 194.2 4-10 (2) Technology 25.3 20.7 4.6 3-5 Other 58.6 (1) 23.2 35.4 2-15 Trademarks 22.3 - 22.3 Indefinite Total other acquired intangible assets $ 1,209.3 $ 618.6 $ 590.7 2008 Other acquired intangible assets: Provider networks $ 703.2 $ 340.2 $ 363.0 12-25 Customer lists 399.9 150.8 249.1 4-10 Technology 25.3 14.7 10.6 3-5 Other 38.1 15.7 22.4 2-15 Trademarks 22.3 - 22.3 Indefinite Total other acquired intangible assets $ 1,188.8 $ 521.4 $ 667.4 (1) As a result of our acquisition of Horizon in 2009, we preliminarily assigned $21 million to Other. w(2) The amortization period for our customer lists and provider networks includes an assumption of renewal or extension of these arrangements.At December 31, 2009, the period prior to the next renewal or extension for our provider networks ranges from 1 to 3 years and the weighted average period prior to the next renewal or extension for our customer lists is .7 years.Any costs related to the renewal or extension of these contracts is expensed as incurred. We estimate annual pretax amortization for other acquired intangible assets over the next five years to be as follows: (Millions) 2010 $ 95.1 2011 87.7 2012 76.2 2013 67.0 2014 47.9 |
8. Investments
8. Investments | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Investments | 8. Investments Total investments at December 31, 2009 and 2008 were as follows: 2009 2008 (Millions) Current Long-term Total Current Long-term Total Debt and equity securities available for sale $ 2,834.8 $ 14,324.9 $ 17,159.7 $ 633.8 $ 13,359.5 $ 13,993.3 Mortgage loans 86.1 1,507.9 1,594.0 70.4 1,609.5 1,679.9 Other investments 1.8 1,218.3 1,220.1 1.8 1,194.4 1,196.2 Total investments $ 2,922.7 $ 17,051.1 $ 19,973.8 $ 706.0 $ 16,163.4 $ 16,869.4 Debt and equity securities available for sale at December 31, 2009 and 2008 were as follows: Gross Gross Amortized Unrealized Unrealized Fair (Millions) Cost Gains Losses Value December 31, 2009 Debt securities: U.S. government securities $ 1,801.3 $ 50.7 $ (5.2) $ 1,846.8 States, municipalities and political subdivisions 2,022.2 80.7 (27.5) 2,075.4 U.S. corporate securities 6,741.9 497.1 (54.4) 7,184.6 Foreign securities 2,554.5 210.9 (20.9) 2,744.5 Residential mortgage-backed securities 1,375.8 49.4 (5.0) (1) 1,420.2 Commercial mortgage-backed securities 1,109.8 37.6 (104.0) (1) 1,043.4 Other asset-backed securities 419.6 25.0 (8.2) (1) 436.4 Redeemable preferred securities 381.9 27.8 (41.0) 368.7 Total debt securities 16,407.0 979.2 (266.2) 17,120.0 Equity securities 35.3 7.9 (3.5) 39.7 Total debt and equity securities (2) $ 16,442.3 $ 987.1 $ (269.7) $ 17,159.7 December 31, 2008 Debt securities: U.S. government securities $ 890.7 $ 115.3 $ (.4) $ 1,005.6 States, municipalities and political subdivisions 1,942.8 23.3 (72.5) 1,893.6 U.S. corporate securities 6,343.8 228.2 (416.5) 6,155.5 Foreign securities 2,134.0 103.0 (124.9) 2,112.1 Residential mortgage-backed securities 1,210.2 39.3 (.4) 1,249.1 Commercial mortgage-backed securities 1,086.4 15.3 (239.3) 862.4 Other asset-backed securities 441.3 1.5 (59.3) 383.5 Redeemable preferred securities 400.4 6.6 (107.0) 300.0 Total debt securities 14,449.6 532.5 (1,020.3) 13,961.8 Equity securities 43.4 .2 (12.1) 31.5 Total debt and equity securities (2) $ 14,493.0 $ 532.7 $ (1,032.4) $ 13,993.3 w(1) When we record a credit-related OTTI on a security, we recognize a loss in earnings equal to the difference between the securitys amortized cost and the present value of its cash flows.If we do not intend to sell the security |
9. Other Comprehensive Income
9. Other Comprehensive Income (Loss) | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Other Comprehensive Income | 9. Other Comprehensive Income (Loss) Shareholders equity included the following activity in accumulated other comprehensive loss in 2009: Net Unrealized Gains (Losses) Securities Foreign Accumulated Currency Pension Other Previously and and OPEB Comprehensive (Millions) Impaired (1) All Other Derivatives Plans Income (Loss) Balance at December 31, 2008 $ - $ (229.3 ) $ (8.7 ) $ (1,643.3 ) $ (1,881.3 ) Cumulative effect of adopting a new accounting standard($83.0 pretax) (2) (5.3 ) (48.4 ) - - (53.7 ) Net unrealized gains (losses) ($1,004.6 pretax) 106.3 592.4 34.4 (80.1 ) 653.0 Reclassification to earnings ($110.5 pretax) (.7 ) (79.0 ) (.4 ) 139.1 59.0 Balance at December 31, 2009 $ 100.3 $ 235.7 $ 25.3 $ (1,584.3 ) $ (1,223.0 ) (1) Represents the non-credit-related component of OTTI on debt securities that we do not intend to sell as well as subsequent changes in fair value related to previously impaired debt securities. (2) Effective April 1, 2009, we adopted new accounting guidance for other-than-temporary impairments of debt securities.Refer to Note 2 beginning on page 48 for additional information on the cumulative effect adjustment required. Shareholders equity included the following activity in accumulated other comprehensive loss in 2008 and 2007: Net Unrealized Gains (Losses) Foreign Accumulated Currency Pension Other and and OPEB Comprehensive (Millions) Securities Derivatives Plans Income (Loss) Balance at December 31, 2006 $ 66.5 $ 19.2 $ (711.4 ) $ (625.7 ) Effect of changing measurement date of pension and OPEB plans pursuant to new accounting guidance - - 113.9 (1) 113.9 Balance at January 1, 2007, as adjusted 66.5 19.2 (597.5 ) (511.8 ) Net unrealized (losses) gains ($250.0 pretax) (64.3 ) - 226.8 162.5 Net foreign currency and derivative losses ($(13.7) pretax) - (8.9 ) - (8.9 ) Reclassification to earnings ($107.4 pretax) 51.1 (3.3 ) 22.0 69.8 Balance at December 31, 2007 53.3 7.0 (348.7 ) (288.4 ) Net unrealized losses ($3,158.9 pretax) (756.7 ) - (1,296.6 ) (2,053.3 ) Net foreign currency and derivative losses ($25.5 pretax) - (16.6 ) - (16.6 ) Reclassification to earnings ($647.7 pretax) 474.1 0.9 2.0 477.0 Balance at December 31, 2008 $ (229.3 ) $ (8.7 ) $ (1,643.3 ) $ (1,881.3 ) (1) We elected to adopt the measurement date provisions of new accounting guidance for defined benefit plans and other postretirement benefits in 2007.The transition provisions |
10. Financial Instruments
10. Financial Instruments | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Financial Instruments | 10. Financial Instruments The preparation of our consolidated financial statements in accordance with GAAP requires certain of our assets and liabilities to be reflected at their fair value, and others on another basis, such as an adjusted historical cost basis.In this note, we provide details on the fair value of financial assets and liabilities and how we determine those fair values.We present this information for those instruments that are reported at fair value for which the change in fair value impacts net income or other comprehensive income separately from other financial assets and liabilities. Financial Instruments Measured at Fair Value in our Balance Sheets Certain of our financial instruments are measured at fair value in our balance sheet.The fair values of these instruments are based on valuations that include inputs that can be classified within one of three levels of a hierarchy established by GAAP.The following are the levels of the hierarchy and a brief description of the type of valuation information (inputs) that qualifies a financial asset or liability for each level: o Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets. o Level 2 Inputs other than Level 1 that are based on observable market data.These include:quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, inputs that are observable that are not prices (such as interest rates, credit risks, etc.) and inputs that are derived from or corroborated by observable markets. o Level 3 Developed from unobservable data, reflecting our own assumptions. Financial assets and liabilities are classified based upon the lowest level of input that is significant to the valuation.When quoted prices in active markets for identical assets and liabilities are available, we use these quoted market prices to determine the fair value of financial assets and liabilities and classify these assets and liabilities as Level 1.In other cases where a quoted market price for identical assets and liabilities in an active market is either not available or not observable, we estimate fair value using valuation methodologies based on available and observable market information or by using a matrix pricing model.These financial assets and liabilities would then be classified as Level 2.If quoted market prices are not available, we determine fair value using broker quotes or an internal analysis of each investments financial performance and cash flow projections.Thus, financial assets and liabilities may be classified in Level 3 even though there may be some significant inputs that may be readily available. The following is a description of the valuation methodologies used for our financial assets and liabilities that are measured at fair value, including the general classification of such assets and liabilities pursuant to the valuation hierarchy. Debt Securities - Where quoted prices are available in an active market, our debt securities are classified in Level 1 of the fair value hierarchy.Our Level 1 debt securities are comprised primarily of U.S. gov |
11. Pension and OPEB Retirement
11. Pension and OPEB Retirement Plans | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Employee Benefit Plan | 11. Pension and Other Postretirement Plans Defined Benefit Retirement Plans We sponsor various noncontributory defined benefit plans, including two pension plans and other postretirement benefit plans (OPEB) that provide certain health care and life insurance benefits for retired employees, including those of our former parent company. For certain of our employees, we provide a noncontributory, defined benefit pension plan, the Aetna Pension Plan, which is a tax-qualified pension plan.All pension plan participants accrue future benefits under a cash balance formula. We also sponsor a supplemental pension plan that, prior to January 1, 2007, had been used to provide benefits for wages above the Internal Revenue Code wage limits applicable to tax qualified pension plans (such as the Aetna Pension Plan).Effective January 1, 2007, no new benefits accrue under the supplemental pension plan, but interest will continue to be credited on outstanding supplemental cash balance accounts and the plan may continue to be used to credit special pension arrangements. In addition, we currently provide certain medical and life insurance benefits for retired employees, including those of our former parent company.We provide subsidized health benefits to certain eligible employees who terminated employment prior to December 31, 2006.There is a cap on our portion of the cost of providing medical and dental benefits to our retirees.All current and future retirees and employees who terminate employment at age 45 or later with at least five years of service are eligible to participate in our group health plans at their own cost. Our measurement date for determining benefit obligations and the fair value of plan assets of our pension and OPEB plans is December 31 (the end of our fiscal year). The following table shows the changes in the benefit obligations during 2009 and 2008 for our pension and OPEB plans. Pension Plans OPEB Plans (Millions) 2009 2008 2009 2008 Benefit obligation, beginning of year $ 4,742.8 $ 4,906.2 $ 329.6 $ 332.1 Service cost 48.3 45.3 .2 .3 Interest cost 316.5 312.2 21.7 20.0 Actuarial loss (gain) 528.6 (232.6 ) 12.7 11.4 Benefits paid (290.1 ) (288.3 ) (33.7 ) (34.2 ) Benefit obligation, end of year $ 5,346.1 $ 4,742.8 $ 330.5 $ 329.6 The discount rates used to determine the benefit obligation of our pension and OPEB plans were calculated using a yield curve.The yield curve consisted of a series of individual discount rates, with each discount rate corresponding to a single point in time, based on high-quality bonds.Projected benefit payments are discounted to the measurement date using the corresponding rate from the yield curve.The weighted average discount rate for our pension plan was 5.89% and 6.89% for 2009 and 2008, respectively.The discount rate for our OPEB plan was 5.64% and 6.92% for 2009 and 2008, respectively.The discount rates differ for our pension and OPEB plans due to the nature of the projected benefit pay |
12. Stock-based Employee Incent
12. Stock-based Employee Incentive Plans | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Employee Incentive Plans | 12. Stock-based Employee Incentive Plans Our stock-based employee compensation plans (collectively, the Plans) provide for awards of stock options, SARs, restricted stock units (RSUs), performance stock units (PSUs), deferred contingent common stock and the ability for employees to purchase common stock at a discount.At December 31, 2009, approximately 83 million common shares were available for issuance under the Plans. Executive, middle management and non-management employees may be granted stock options, SARs, RSUs and PSUs.Stock options are granted to purchase our common stock at or above the market price on the date of grant.SARs granted will be settled in stock, net of taxes, based on the appreciation of our stock price on the exercise date over the market price on the date of grant.SARs and stock options generally become 100% vested three years after the grant is made, with one-third vesting each year.Vested SARs and stock options may be exercised at any time during the 10 years after grant, except in certain circumstances, generally related to employment termination or retirement.At the end of the 10-year period, any unexercised SARs and stock options expire.For each RSU granted, employees receive one share of common stock, net of taxes, at the end of the vesting period.The RSUs will generally become 100% vested three years after the grant is made, with one-third vesting each year.The PSUs granted in 2008 and 2009 will become vested on December 31, 2009 and December 31, 2010, respectively.The number of vested PSUs (which could be as high as 200% of the original number of units granted and as low as 0%) is dependent upon the degree to which we achieve performance goals as determined by the Boards Committee on Compensation and Organization.The value of each vested PSU is equal to one share of common stock, net of taxes.The PSUs granted in 2008 did not vest as the underlying performance metric was not achieved by December 31, 2009. The fair value of RSUs and PSUs are based on the market price of our common stock on the date of grant.We estimate the fair value of stock options and SARs using a modified Black-Scholes option pricing model.SARs granted in 2009, 2008 and 2007 had a weighted average per share fair value of $11.37, $14.71, and $15.10, respectively, using the assumptions noted in the following table: 2009 2008 2007 Dividend yield .1 % .1 % .1 % Expected volatility 39.8 % 31.7 % 31.7 % Risk-free interest rate 1.8 % 2.5 % 4.7 % Expected term 4.6 years 4.4 years 4.7 years We use historical data to estimate the period of time that stock options or SARs are expected to be outstanding.Expected volatilities are based on a weighted average of the historical volatility of our stock price and implied volatility from traded options on our stock.The risk-free interest rate for periods within the expected life of the stock option or SAR is based on the benchmark five-year U.S. Treasury rate in effect on the date of grant.The dividend yield assumption is based on our historical dividends declared. The stock option and SAR transactions in |
13. Income Taxes
13. Income Taxes | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Income Taxes | 13. Income Taxes The components of our income tax provision in 2009, 2008 and 2007 were as follows: (Millions) 2009 2008 2007 Current taxes: Federal $ 657.4 $ 744.6 $ 742.1 State 61.2 25.5 63.8 Total current taxes 718.6 770.1 805.9 Deferred taxes (benefits): Federal (81.1 ) 19.4 161.0 State (12.8 ) .6 (1.5 ) Total deferred income taxes (93.9 ) 20.0 159.5 Total income taxes $ 624.7 $ 790.1 $ 965.4 Income taxes were different from the amount computed by applying the federal income tax rate to income before income taxes as follows: (Millions) 2009 2008 2007 Income before income taxes $ 1,901.2 $ 2,174.2 $ 2,796.4 Tax rate 35 % 35 % 35 % Application of the tax rate 665.4 761.0 978.7 Tax effect of: Valuation allowance (19.4 ) 56.0 - Other, net (21.3 ) (26.9 ) (13.3 ) Income taxes $ 624.7 $ 790.1 $ 965.4 The significant components of our net deferred tax assets at December 31, 2009 and 2008 were as follows: (Millions) 2009 2008 Deferred tax assets: Reserve for anticipated future losses on discontinued products $ 194.4 $ 262.7 Employee and postretirement benefits 626.1 601.6 Investments, net 283.2 422.2 Deferred policy acquisition costs 51.4 56.5 Unrealized losses on investment securities - 128.2 Insurance reserves 157.5 27.2 Other 126.6 102.0 Gross deferred tax assets 1,439.2 1,600.4 Less: Valuation allowance 47.0 66.1 Deferred tax assets, net of valuation allowance 1,392.2 1,534.3 Deferred tax liabilities: Unrealized gains on investment securities 194.9 - Goodwill and other acquired intangible assets 256.8 244.0 Depreciation and amortization 223.7 210.1 Total gross deferred tax liabilities 675.4 454.1 Net deferred tax assets (1) $ 716.8 $ 1,080.2 (1) Includes $383.4 million and $301.5 million classified as current assets at December 31, 2009 and 2008, respectively, and $333.4 million and $778.7 million classified as noncurrent assets at December 31, 2009 and 2008, respectively. Valuation allowances are provided when we estimate that it is more likely than not that deferred tax assets will not be realized.A valuation allowance has been established on certain federal and state net operating losses, as well as on a portion of realized capital losses.We base our estimates of the future realization of deferred tax assets on historic and anticipated taxable income.However, the amount of the deferred tax asset considered realizable could be adjusted in the future if we revise our estimates of anticipated taxable income. Beginning with the 2007 tax year, we entered into the Compliance Assurance Process (the CAP) with the IRS.Un |
14. Debt
14. Debt | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Debt | 14. Debt The carrying value of our long-term debt at December 31, 2009 and 2008 was as follows: (Millions) 2009 2008 Senior notes, 5.75%, due 2011 $ 449.9 $ 449.8 Senior notes, 7.875%, due 2011 449.5 449.2 Senior notes, 6.0%, due 2016 747.1 746.7 Senior notes, 6.5%, due 2018 498.8 498.6 Senior notes, 6.625%, due 2036 798.6 798.6 Senior notes, 6.75%, due 2037 695.6 695.4 Total long-term debt $ 3,639.5 $ 3,638.3 In September 2008, we issued $500 million of 6.5% senior notes due 2018 (the 2008 Senior Notes) and used the proceeds to repay commercial paper borrowings.This debt issuance was partially hedged with forward starting swaps prior to issuance.At the time of the debt issuance, the swaps were terminated and the amount paid was recorded as an other comprehensive loss and is being amortized as an increase of interest expense over the life of the relevant senior notes. At December 31, 2009 and December 31, 2008, we had approximately $481 million and $216 million, respectively, of commercial paper outstanding with a weighted average interest rate of .38% and 5.36%, respectively. We paid $244 million, $228 million and $178 million in interest in 2009, 2008, and 2007, respectively. At December 31, 2009 we had an unsecured $1.5 billion revolving credit agreement (the Facility) with several financial institutions which terminates in March 2013.The Facility provides for the issuance of up to $200 million of letters of credit at our request, which count as usage of the available commitments under the Facility.Upon our agreement with one or more financial institutions, we may expand the aggregate commitments under the Facility to a maximum of $2.0 billion.Various interest rate options are available under the Facility.Any revolving borrowings mature on the termination date of the Facility.We pay facility fees on the Facility ranging from .045% to .175% per annum, depending upon our long-term senior unsecured debt rating.The facility fee was .06% at December 31, 2009.The Facility contains a financial covenant that requires us to maintain a ratio of total debt to consolidated capitalization as of the end of each fiscal quarter ending on or after December 31, 2007 at or below .5 to 1.0.For this purpose, consolidated capitalization equals the sum of shareholders equity, excluding any overfunded or underfunded status of our pension and OPEB plans and any net unrealized capital gains and losses, and total debt (as defined in the Facility).We met this requirement at December 31, 2009. There were no amounts outstanding under the Facility at December 31, 2009. During 2009, we entered into four interest rate swaps each with a notional value of $100 million.We entered into these swaps to hedge interest rate exposure in anticipation of future issuance of long-term debt.At December 31, 2009, the interest rate swaps had an aggregate fair value of $42.2 million, which were reflected in other comprehensive income for the year ended December 31, 2009. |
15. Capital Stock
15. Capital Stock | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Capital Stock | 15. Capital Stock From time to time, the Board authorizes us to repurchase our common stock.Our activity under Board authorized share repurchase programs in 2009, 2008 and 2007 was as follows: Shares Purchased 2009 2008 2007 (Millions) Purchase Not to Exceed Shares Cost Shares Cost Shares Cost Authorization date: February 27, 2009 $ 750.0 5.3 $ 158.8 - $ - - $ - June 27, 2008 750.0 23.6 614.2 5.8 135.8 - - February 29, 2008 750.0 - - 17.4 750.0 - - September 28, 2007 1,250.0 - - 19.7 901.9 6.1 348.1 April 27, 2007 750.0 - - - - 15.0 750.0 September 29, 2006 750.0 - - - - 12.1 570.9 Total repurchases N/A 28.9 $ 773.0 42.9 $ 1,787.7 33.2 $ 1,669.0 Repurchase authorization remaining at December 31, N/A $ 591.2 N/A $ 614.2 N/A $ 901.9 On September 25, 2009, the Board declared an annual cash dividend of $.04 per common share to shareholders of record at the close of business on November 13, 2009.The $17.3 million dividend was paid on November 30, 2009. In addition to the capital stock disclosed on our balance sheets, we have authorized 8 million shares of Class A voting preferred stock, $.01 par value per share.At December 31, 2009, there were also 270 million undesignated shares that the Board has the power to divide into such classes and series, with such voting rights, designations, preferences, limitations and special rights as the Board determines. |
16. Dividend Restrictions and S
16. Dividend Restrictions and Statutory Surplus | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Dividend Restrictions | 16. Dividend Restrictions and Statutory Surplus Our business operations are conducted through subsidiaries that principally consist of HMOs and insurance companies.In addition to general state law restrictions on payments of dividends and other distributions to shareholders applicable to all corporations, HMOs and insurance companies are subject to further regulations that, among other things, may require such companies to maintain certain levels of equity, and restrict the amount of dividends and other distributions that may be paid to their parent corporations.The additional regulations applicable to our HMO and insurance company subsidiaries are not expected to affect our ability to service our debt or to pay dividends. Under regulatory requirements, the amount of dividends that may be paid to Aetna by our insurance and HMO subsidiaries without prior approval by regulatory authorities as calculated at December 31, 2009 is approximately $1.2 billion in the aggregate.There are no such restrictions on distributions from Aetna to its shareholders. The combined statutory net income for the years ended and combined statutory capital and surplus at December 31, 2009, 2008 and 2007 for our insurance and HMO subsidiaries, were as follows: (Millions) 2009 2008 2007 Statutory net income $ 1,308.8 $ 1,815.8 $ 1,901.9 Statutory capital and surplus 6,777.1 5,665.6 5,316.0 |
17. Reinsurance
17. Reinsurance | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Reinsurance | 17. Reinsurance Effective October 1, 1998, we reinsured certain policyholder liabilities and obligations related to individual life insurance (in conjunction with our former parent companys sale of this business).These transactions were in the form of indemnity reinsurance arrangements, whereby the assuming companies contractually assumed certain policyholder liabilities and obligations, although we remain directly obligated to policyholders.The liability related to our obligation is recorded in future policy benefits and policyholders funds on our balance sheets.Assets related to and supporting these policies were transferred to the assuming companies, and we recorded a reinsurance recoverable. Effective November 1, 1999, we reinsured certain policyholder liabilities and obligations related to paid-up group whole life insurance.In 2008, we recorded an allowance against our reinsurance recoverable from Lehman Re Ltd. (Lehman Re) of $42 million pretax in operating expenses.The reinsurance recoverable results from the 1999 transaction as described above. In September 2008, we took possession of assets supporting the reinsurance recoverable, which previously were held as collateral in a trust.In September 2008, Lehman Re commenced proceedings in Bermuda to liquidate itself.We intend to pursue our claims in Lehman Res liquidation proceedings.We believe our reinsurance recoverables supporting all of these reinsurance obligations are adequate at December 31, 2009. There is not a material difference between premiums on a written basis versus an earned basis.Reinsurance recoveries were approximately $56 million, $63 million and $62 million in 2009, 2008 and 2007, respectively.Reinsurance recoverables related to these obligations were approximately $1.0 billion atboth December 31, 2009 and 2008 and $1.1 billion at December 31, 2007.At December 31, 2009, reinsurance recoverables with a carrying value of approximately $969 million were associated with three reinsurers. Effective October 1, 2008, we entered into an agreement with Hannover Life Reassurance Company of America to reinsure fifty percent of our group term life and group accidental death and dismemberment insurance policies.We entered into this contract in order to reduce the risk on catastrophic loss which in turn reduces our statutory capital and surplus requirements.This contract does not qualify for reinsurance accounting under GAAP, and consequently it is accounted for using deposit accounting. |
18. Commitments and Contingent
18. Commitments and Contingent Liabilities | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Commitment and Contingencies | 18. Commitments and Contingent Liabilities Guarantees We have the following guarantee arrangements at December 31, 2009. ASC Claim Funding Accounts -We have arrangements with certain banks for the processing of claim payments for our ASC customers.The banks maintain accounts to fund claims of our ASC customers.The customer is responsible for funding the amount paid by the bank each day.In these arrangements, we guarantee that the banks will not sustain losses if the responsible ASC customer does not properly fund its account.The aggregate maximum exposure under these arrangements is $250 million.We could limit our exposure to this guarantee by suspending the payment of claims for ASC customers that have not adequately funded the amount paid by the bank. Indemnification Agreements - In connection with certain acquisitions and dispositions of assets and/or businesses, we have incurred certain customary indemnification obligations to the applicable seller or purchaser, respectively.In general, we have agreed to indemnify the other party for certain losses relating to the assets or business that we purchased or sold.Certain portions of our indemnification obligations are capped at the applicable purchase price, while other arrangements are not subject to such a limit.At December 31, 2009, we do not believe that our future obligations under any of these agreements will be material to us. Separate Account assets - Certain Separate Account assets associated with the Large Case Pensions business represent funds maintained as a contractual requirement to fund specific pension annuities that we have guaranteed.Contractual obligations in these Separate Accounts were $4.0 billion and $4.5 billion at December 31, 2009 and 2008, respectively.Refer to Note 2 beginning on page 48 for additional information on Separate Accounts.Contract holders assume all investment and mortality risk and are required to maintain Separate Account balances at or above a specified level.The level of required funds is a function of the risk underlying the Separate Accounts' investment strategy.If contract holders do not maintain the required level of Separate Account assets to meet the annuity guarantees, we would establish an additional liability.Contract holders' balances in the Separate Accounts at December 31, 2009 exceeded the value of the guaranteed benefit obligation.As a result, we were not required to maintain any additional liability for our related guarantees at December 31, 2009. Guaranty Fund Assessments, Market Stabilization and Other Non-Voluntary Risk Sharing Pools Under guaranty fund laws existing in all states, insurers doing business in those states can be assessed (up to prescribed limits) for certain obligations of insolvent insurance companies to policyholders and claimants.Our assessments generally are based on a formula relating to our premiums in the state compared to the premiums of other insurers.Certain states allow recoverability of assessments as offsets to premium taxes.While we have historically recovered more than half of guaranty fund assessments through statutorily-permitted premium tax offsets, significant i |
19. Segment Information
19. Segment Information | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Segment Information | 19. Segment Information Our operations are conducted in three business segments:Health Care, Group Insurance and Large Case Pensions.Our Corporate Financing segment is not a business segment.It is added to our business segments in order to reconcile to our consolidated results.The Corporate Financing segment includes interest expense on our outstanding debt and, beginning on January 1, 2009, the financing components of our pension and other post-retirement benefit plan expense (the service cost components of this expense are allocated to our business segments).Prior periods have been reclassified to reflect this change. Summarized financial information of our segment operations in 2009, 2008 and 2007 were as follows: Health Group Large Case Corporate Total (Millions) Care Insurance Pensions Financing Company 2009 Revenue from external customers (1) $ 31,661.8 $ 1,827.1 $ 183.8 $ - $ 33,672.7 Net investment income 392.5 274.1 369.8 - 1,036.4 Interest expense - - - 243.4 243.4 Depreciation and amortization expense 409.1 6.9 - - 416.0 Income taxes (benefits) 744.9 38.7 8.5 (167.4 ) 624.7 Operating earnings (loss) (2) 1,412.7 103.8 32.2 (310.8 ) 1,237.9 Segment assets 20,734.7 4,967.4 12,848.3 - 38,550.4 2008 Revenue from external customers (1) $ 28,709.9 $ 1,781.5 $ 205.2 $ - $ 30,696.6 Net investment income 341.3 240.4 328.3 - 910.0 Interest expense - - - 236.4 236.4 Depreciation and amortization expense 371.4 6.9 - - 378.3 Income taxes (benefits) 875.1 (54.2 ) 1.2 (32.0 ) 790.1 Operating earnings (loss) (2) 1,802.3 136.8 38.8 (57.0 ) 1,920.9 Segment assets 18,754.5 4,435.0 12,663.0 - 35,852.5 2007 Revenue from external customers (1) $ 24,431.4 $ 1,875.1 $ 216.9 $ - $ 26,523.4 Net investment income 370.9 303.0 476.0 - 1,149.9 Interest expense - - - 180.6 180.6 Depreciation and amortization expense 314.6 6.9 - - 321.5 Income taxes (benefits) 919.2 36.5 32.0 (22.3 ) 965.4 Operating earnings (loss) (2) 1,698.0 144.6 35.8 (41.3 ) 1,837.1 Segment assets 18,223.4 5,469.7 27,031.6 - 50,724.7 (1) Revenue from the United States federal government was ten percent or more of our total revenue from external customers in 2009, 2008 and 2007.We earned $7.2 billion, $6.2 billion and $3.8 billion of revenue from this customer in 2009, 2008 and 2007, respectively, in the Health Care and Group Insurance segments. (2) Operating earnings (loss) excludes net realized capital |
20. Discontinued Products
20. Discontinued Products | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Notes To Financial Statements [Abstract] | |
Discontinued Products | 20. Discontinued Products Prior to 1993, we sold single-premium annuities (SPAs) and guaranteed investment contracts (GICs), primarily to employer sponsored pension plans.In 1993, we discontinued selling these products, and now we refer to these products as discontinued products. We discontinued selling these products because they were generating losses for us, and we projected that they would continue to generate losses over their life (which is greater than 30 years); so we established a reserve for anticipated future losses at the time of discontinuance.This reserve represents the present value (at the risk-free rate of return at the time of discontinuance, consistent with the duration of the liabilities) of the difference between the expected cash flows from the assets supporting these products and the cash flows expected to be required to meet the obligations of the outstanding contracts.Because we projected anticipated cash shortfalls in our discontinued products, at the time of discontinuance we established a receivable from Large Case Pensions continuing products (which is eliminated in consolidation). Key assumptions in setting this reserve include future investment results, payments to retirees, mortality and retirement rates and the cost of asset management and customer service.In 1997, we began the use of a bond default assumption to reflect historical default experience.In 1995, we modified the mortality tables used in order to reflect a more up-to-date 1994 Uninsured Pensioners Mortality table.Other than these changes, since 1993 there have been no significant changes to the assumptions underlying the reserve. We review the adequacy of this reserve quarterly based on actual experience.As long as our expectation of future losses remains consistent with prior projections, the results of the discontinued products are applied to the reserve and do not affect net income.However, if actual or expected future losses are greater than we currently estimate, we may have to increase the reserve, which could adversely impact net income.If actual or expected future losses are less than we currently estimate, we may have to decrease the reserve, which could favorably impact net income.The reserve for anticipated future losses is included in future policy benefits on our balance sheet. As a result of this review, the reserve at December 31, 2009 reflects managements best estimate of anticipated future losses.In the years ended December 31, 2008 and 2007, $44 million ($29 million after tax) and $64 million ($42 million after tax) of the reserve, respectively, was released due to favorable mortality and retirement experience compared to assumptions we previously made in estimating the reserve.The 2007 reserve reduction was also due to favorable investment performance. The activity in the reserve for anticipated future losses on discontinued products in 2009, 2008 and 2007 was as follows (pretax): (Millions) 2009 2008 2007 Reserve, beginning of period $ 790.4 $ 1,052.3 $ 1,061.1 Operating (loss) income (34.8 ) (93.4 ) 28.5 Cumulative effect of new accoun |
Schedule I: Financial Informati
Schedule I: Financial Information of Aetna Inc. (Parent Company Only) | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Schedule to Financial Statements [Abstract] | |
Schedule I: Financial Information of Aetna Inc. (Parent Company Only) | Schedule I Financial Information of Aetna Inc. Aetna Inc. (Parent Company Only) Statements of Income For the Years Ended December 31, (Millions) 2009 2008 2007 Net investment income $ 2.8 $ 10.5 $ 26.0 Other income 30.2 - - Net realized capital losses (3.5 ) (11.6 ) (.9 ) Total revenue 29.5 (1.1 ) 25.1 Operating expenses 95.8 69.9 112.7 Interest expense 243.5 236.0 180.3 Total expenses 339.3 305.9 293.0 Loss before income tax benefit and equity in earnings of affiliates, net (309.8 ) (307.0 ) (267.9 ) Income tax benefit 104.7 86.6 97.1 Equity in earnings of affiliates, net (1) 1,481.6 1,604.5 2,001.8 Net income $ 1,276.5 $ 1,384.1 $ 1,831.0 (1) Includes amortization of other acquired intangible assets after tax of $63.2 million, $70.3 million and $63.4 million for the years ended December 31, 2009, 2008 and 2007, respectively. Refer to accompanying Notes to Financial Statements. Aetna Inc. (Parent Company Only) Balance Sheets At December 31, (Millions) 2009 2008 Assets Current assets: Cash and cash equivalents $ 75.3 $ 33.8 Investments 43.7 63.4 Other receivables 142.5 99.3 Income taxes receivable - 16.1 Deferred income taxes 70.4 63.0 Other current assets 13.0 19.2 Total current assets 344.9 294.8 Investment in affiliates (1) 14,285.1 12,643.2 Long-term investments 42.2 - Deferred income taxes 578.7 539.7 Other long-term assets 26.0 27.5 Total assets $ 15,276.9 $ 13,505.2 Liabilities and shareholders' equity Current liabilities: Short-term debt $ 480.8 $ 215.7 Income tax payable 6.4 - Accrued expenses and other current liabilities 341.4 262.3 Total current liabilities 828.6 478.0 Long-term debt 3,639.5 3,638.3 Employee benefit liabilities 1,269.3 1,169.6 Other long-term liabilities 35.7 32.9 Total liabilities 5,773.1 5,318.8 Shareholders' equity: Common stock ($.01 par value; 2.7 billion shares authorized; 430.8 million and 456.3 million shares issued and outstanding in 2009 and 2008, respectively) and additional paid-in capital 470.1 351.2 Retained earnings 10,256.7 9,716.5 Accumulated other comprehensive loss (1,223.0 ) (1,881.3 ) Total shareholders' equity 9,503.8 8,186.4 Total liabilities and shareholders' equity $ 15,276.9 $ 13,505.2 (1) Includes goodwill and other acquired intangible assets of $5.7 billion and $5.8 billion at December 31, 2009 and 2008, respectively. Refer to accompanying Notes to Financial Statements. Aetna Inc. (Parent Company Only) Statements of Shareholders |
Document Information
Document Information | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Document Information [Text Block] | |
Document Type | 10-K |
Document Period End Date | 2009-12-31 |
Amendment Flag | false |
Entity Information
Entity Information (USD $) | |
In Billions, except Share data in Millions | 12 Months Ended
Dec. 31, 2009 |
Entity [Text Block] | |
Entity Registrant Name | AETNA INC /PA/ |
Entity Central Index Key | 0001122304 |
Current Fiscal Year End Date | --12-31 |
Entity Well Known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Public Float | 13.7 |
Entity Common Stock Shares Outstanding | 430.8 |