Aetna 2012 Annual Report Download - page 112

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Annual Report- Page 106
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 carried on our balance sheets 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
our assessment of the credit worthiness of the borrower and the remaining duration of the loans. The 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 classified by level of fair value hierarchy for certain of our financial
instruments at December 31, 2012 was as follows:
Carrying
Value
Estimated Fair Value
(Millions) Level 1 Level 2 Level 3 Total
December 31, 2012
Assets:
Mortgage loans $ 1,643.6 $ — $ — $ 1,698.6 $ 1,698.6
Liabilities:
Investment contract liabilities:
With a fixed maturity 18.5 — — 18.5 18.5
Without a fixed maturity 590.2 — — 611.1 611.1
Long-term debt 6,481.3 — 7,408.7 — 7,408.7
The carrying value and estimated fair value of certain of our financial instruments at December 31, 2011 was as
follows:
December 31, 2011
Carrying Estimated
(Millions) Value Fair Value
Assets:
Mortgage loans $ 1,648.5 $ 1,703.7
Liabilities:
Investment contract liabilities:
With a fixed maturity 34.6 34.9
Without a fixed maturity 543.9 559.4
Long-term debt 3,977.7 4,643.1