Aetna 2012 Annual Report Download - page 21

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Annual Report- Page 15
Assets supporting experience-rated products may be subject to contract holder or participant withdrawals.
Experience-rated contract holder and participant-directed withdrawals for the last three years were as follows:
(Millions) 2012 2011 2010
Scheduled contract maturities and benefit payments (1) $ 236.2 $ 245.1 $ 254.0
Contract holder withdrawals other than scheduled contract
maturities and benefit payments 4.7 31.1 25.9
Participant-directed withdrawals (2) 2.3 3.9 3.9
(1) Includes payments made upon contract maturity and other amounts distributed in accordance with contract schedules.
(2) Approximately $569.1 million, $549.3 million and $527.8 million at December 31, 2012, 2011 and 2010, respectively, of experience-
rated pension contracts allowed for unscheduled contract holder withdrawals, subject to timing restrictions and formula-based market
value adjustments. Further, approximately $84.8 million, $94.4 million and $95.3 million at December 31, 2012, 2011 and 2010,
respectively, of experience-rated pension contracts supported by our general account assets could be withdrawn or transferred to other
plan investment options at the direction of plan participants, without market value adjustment, subject to plan, contractual and income
tax provisions.
Debt and Equity Securities
The debt securities in our investment portfolio had an average credit quality rating of A at both December 31, 2012
and 2011, with approximately $4.6 billion at December 31, 2012 and $4.4 billion at December 31, 2011, rated
AAA, respectively. The debt securities that were rated below investment grade (that is, having a quality rating
below BBB-/Baa3) were $1.1 billion at December 31, 2012 and $1.2 billion at December 31, 2011 (of which 19%
and 20% at December 31, 2012 and 2011, respectively, supported our discontinued and experience-rated products).
At December 31, 2012 and 2011, we held approximately $694 million and $733 million, respectively, of municipal
debt securities that were guaranteed by third parties, representing approximately 3% and 4% of our total
investments, respectively. These securities had an average credit quality rating of A+ at both December 31, 2012
and 2011 with and without the guarantee. We do not have any significant concentration of investments with third
party guarantors (either direct or indirect).
At December 31, 2012 and 2011, approximately 1% and 2%, respectively, of our investment portfolio was
comprised of investments that are either European sovereign, agency, or local government debt or European
corporate issuers of countries which, in our judgment based on an analysis of market-yields, are experiencing
economic, fiscal or political strains such that the likelihood of default may be higher than if those factors did not
exist.
We classify our debt and equity securities as available for sale, and carry them at fair value on our balance
sheet. Approximately 1% of our debt and equity securities at both December 31, 2012 and 2011 were valued using
inputs that reflect our own assumptions (categorized as Level 3 inputs in accordance with GAAP). Refer to Note 10
of Notes to Consolidated Financial Statements beginning on page 102 for additional information on the
methodologies and key assumptions we use to determine the fair value of investments.
At December 31, 2012 and 2011, our debt and equity securities had net unrealized capital gains of $1.9 billion and
$1.5 billion, respectively, of which $540 million and $457 million, respectively, related to our experience-rated and
discontinued products.
Refer to Note 8 of Notes to Consolidated Financial Statements beginning on page 95 for details of gross unrealized
capital gains and losses by major security type, as well as details on our debt securities with unrealized capital
losses at December 31, 2012 and 2011. We regularly review our debt securities to determine if a decline in fair
value below the carrying value is other-than-temporary. If we determine a decline in fair value is other-than-
temporary, we will write down the carrying value of the security. The amount of the credit-related impairment is
included in our operating results, and the non-credit component is included in other comprehensive income if we do
not intend to sell the security. Accounting for other-than-temporary impairment (“OTTI”) of our debt securities is
considered a critical accounting estimate. Refer to “Critical Accounting Estimates - Other-Than-Temporary
Impairment of Debt Securities” on page 27 for additional information.