Aetna 2009 Annual Report Download - page 66

We reviewed the securities in the tables above and concluded that these are performing assets generating investment
income to support the needs of our business. In performing this review, we considered factors such as the quality of
the investment security based on research performed by external rating agencies and our internal credit analysts and
the prospects of realizing the carrying value of the security based on the investment’ s current prospects for recovery.
Unrealized losses at December 31, 2009 and 2008 were generally caused by the widening of credit spreads on these
particular securities relative to the interest rates on U.S. Treasury securities. As of December 31, 2009, we did not
have an intention to sell the securities that were in an unrealized loss position.
The maturity dates for debt securities in an unrealized loss position at December 31, 2009 were as follows:
Fair Unrealized Fair Unrealized Fair Unrealized
(Millions) Value Losses Value Losses Value Losses
Due to mature:
Less than one year .8$ -$ 48.3$ 2.0$ 49.1$ 2.0$
One year through five years 47.8 1.8 780.3 11.5 828.1 13.3
After five years through ten years 202.9 6.1 1,026.5 17.8 1,229.4 23.9
Greater than ten years 551.8 45.0 1,120.0 64.8 1,671.8 109.8
Residential mortgage-backed securities - - 391.2 5.0 391.2 5.0
Commercial mortgage-backed securities 182.3 21.6 349.0 82.4 531.3 104.0
Other asset-backed securities 17.0 .3 46.3 7.9 63.3 8.2
Total 1,002.6$ 74.8$ 3,761.6$ 191.4$ 4,764.2$ 266.2$
Supporting discontinued Supporting remaining
and experience-rated products products Total
Net realized capital gains (losses) for the years ended December 31, 2009, 2008 and 2007, excluding amounts related
to experience-rated contract holders and discontinued products, were as follows:
(Millions) 2009 2008 2007
OTTI losses on securities (121.0)$ (643.6)$ (127.8)$
Portion of OTTI losses recognized in other comprehensive income 26.5 - -
Net OTTI losses on securities recognized in earnings (94.5) (643.6) (127.8)
Net realized capital gains (losses), excluding OTTI losses on securities 149.5 (12.3) 54.1
Net realized capital gains (losses) 55.0$ (655.9)$ (73.7)$
The decrease in net OTTI losses recognized in earnings in 2009 compared to 2008 was primarily driven by a
significant change in the accounting guidance for the recognition of OTTI on debt securities and an overall general
improvement in the economic environment in 2009 compared to 2008, which led to fewer securities in an unrealized
loss position. Prior to the adoption of new accounting guidance for OTTI on debt securities on April 1, 2009, both
yield and credit-related OTTI were recognized in earnings. In contrast, on and after April 1, 2009, only credit-related
impairments are recognized in earnings unless we have the intention to sell the security in an unrealized loss position,
in which case yield-related OTTI are also recognized in earnings.
In 2009, 2008 and 2007, yield-related OTTI losses were $76 million, $523 million and $125 million, respectively.
These yield-related impairments were generally caused by changes in interest rates in 2009 and the widening of credit
spreads relative to the interest rates on U.S. Treasury securities in 2009 and 2008 and increases in interest rates in
2007. During 2008, significant declines in the U.S. housing market resulted in the credit and other capital markets
experiencing volatility and limitations on the ability of companies to issue debt or equity securities. The lack of
available credit, lack of confidence in the financial sector, increased volatility in the financial markets and reduced
business activity resulted in credit spreads widening during 2008.
For the year ended December 31, 2008, credit-related impairments were $120 million, which includes credit-related
OTTI losses of $105 million related to investments in debt securities of Lehman Brothers Holdings Inc. and
Washington Mutual, Inc. There were no individually material credit impairments for 2009 or 2007.
Annual Report – Page 60