Aetna 2011 Annual Report Download - page 89

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Annual Report- Page 83
Mortgage Loans
Our mortgage loans are collateralized by commercial real estate. During 2011 and 2010 we had the following
activity in our mortgage loan portfolio:
(Millions)
New mortgage loans
Mortgage loans fully-repaid
Mortgage loans foreclosed
2011
$ 260.4
70.4
—
2010
$ 103.3
129.3
20.0
At December 31, 2011 and 2010, we had no material problem, restructured or potential problem mortgage loans.
We also had no material impairment reserves on these loans at December 31, 2011 or 2010.
We assess our mortgage loans on a regular basis for credit impairments, and annually we assign a credit quality
indicator to each loan. Our credit quality indicator is internally developed and categorizes our portfolio on a scale
from 1 to 7. Category 1 represents loans of superior quality, and Categories 6 and 7 represent loans where
collections are at risk. Most of our mortgage loans fall into the Level 2 to 4 ratings. These ratings represent loans
where credit risk is minimal to acceptable; however, these loans may display some susceptibility to economic
changes. Category 5 represents loans where credit risk is not substantial but these loans warrant management’s
close attention. These indicators are based upon several factors, including current loan to value ratios, property
condition, market trends, borrower quality and deal structure. Based upon our most recent assessment at
December 31, 2011, our mortgage loans were given the following credit quality indicators:
(In Millions, except credit ratings indicator)
1
2 to 4
5
6 and 7
Total
$ 95.6
1,426.1
97.1
29.7
$ 1,648.5
At December 31, 2011 scheduled mortgage loan principal repayments were as follows:
(Millions)
2012
2013
2014
2015
2016
Thereafter
$ 41.7
269.5
102.8
148.8
248.2
844.0
Variable Interest Entities
In determining whether to consolidate a variable interest entity ("VIE"), we consider several factors including
whether we have the power to direct activities, the obligation to absorb losses and the right to receive benefits that
could potentially be significant to the VIE. We have relationships with certain real estate and hedge fund
partnerships that are considered VIEs, but are not consolidated. We record the amount of our investment in these
partnerships as long-term investments on our balance sheets and recognize our share of partnership income or losses
in earnings. Our maximum exposure to loss as a result of our investment in these partnerships is our investment
balance at December 31, 2011 and 2010 of approximately $175 million and $153 million, respectively, and the risk
of recapture of tax credits related to the real estate partnerships previously recognized, which we do not consider
significant. We do not have a future obligation to fund losses or debts on behalf of these investments; however, we
may voluntarily contribute funds. The real estate partnerships construct, own and manage low-income housing
developments and had total assets of approximately $5.1 billion at both December 31, 2011 and 2010. The hedge
fund partnerships had total assets of approximately $5.9 billion and $6.1 billion at December 31, 2011 and 2010,
respectively.