Aetna 2009 Annual Report Download - page 71

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The changes in the balances of Level 3 financial assets for the years ended December 31, 2009 and 2008 were as
follows:
(Millions)
U.S.
Corporate
Securities
Foreign
Securities Other Total
Debt
Securities
Equity
Securities Total
Beginning balance 144.6$ 177.1$ 163.3$ 485.0$ 642.5$ 38.8$ 681.3$
Net realized and unrealized capital gains (losses):
Included in earnings 3.6 11.7 12.3 27.6 (51.9) - (51.9)
Included in other comprehensive income .5 21.4 12.0 33.9 (30.2) (1.0) (31.2)
Other
(1)
7.2 5.7 17.4 30.3 (29.4) 10.4 (19.0)
Purchases, sales and maturities (24.2) (17.6) (44.0) (85.8) (48.5) (34.6) (83.1)
Transfers (out of) into Level 3
(2)
(3.6) .7 (4.6) (7.5) (26.8) 15.7 (11.1)
Ending Balance 128.1$ 199.0$ 156.4$ 483.5$ 455.7$ 29.3$ 485.0$
-$ (.1)$ (.7)$ (.8)$ (53.8)$ -$ (53.8)$
2008
Amount of Level 3 net unrealized capital losses
included in net income
2009
(1) Reflects realized and unrealized capital gains and losses on investments supporting our experience-rated and discontinued products, which do
not impact our results of operations. Refer to Note 20 beginning on page 82 for additional information.
(2) For financial assets that are transferred (out of) into Level 3, we use the fair value of the assets at the (beginning) end of the reporting period.
Financial Instruments Not Measured at Fair Value in our Balance Sheets
The following is a description of the valuation methodologies used for estimating the fair value of our financial
assets and liabilities that are measured at adjusted cost or contract value.
Mortgage loans - Fair values are estimated by discounting expected mortgage loan cash flows at market rates
that reflect the rates at which similar loans would be made to similar borrowers. These rates reflect
management’ s assessment of the credit quality and the remaining duration of the loans. Our fair value
estimates of mortgage loans of lower credit quality, including problem and restructured loans, are based on the
estimated fair value of the underlying collateral.
Investment contract liabilities:
• With a fixed maturity: Fair value is estimated by discounting cash flows at interest rates currently being
offered by, or available to, us for similar contracts.
• Without a fixed maturity: Fair value is estimated as the amount payable to the contract holder upon
demand. However, we have the right under such contracts to delay payment of withdrawals that may
ultimately result in paying an amount different than that determined to be payable on demand.
Long-term debt: Fair values are based on quoted market prices for the same or similar issued debt or, if no
quoted market prices are available, on the current rates estimated to be available to us for debt of similar terms
and remaining maturities.
The carrying value and estimated fair value of certain of our financial instruments at December 31, 2009 and 2008
were as follows:
Estimated Estimated
Carrying Fair Carrying Fair
(Millions) Value Value Value Value
Assets:
Mortgage loans 1,594.0$ 1,506.5$ 1,679.9$ 1,622.9$
Liabilities:
Investment contract liabilities:
With a fixed maturity 32.4 33.5 39.1 38.0
Without a fixed maturity 530.6 503.7 525.6 428.8
Long-term debt 3,639.5 3,865.9 3,638.3 3,372.2
2009 2008
Annual Report – Page 65