Aetna 2013 Annual Report Download - page 144
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Annual Report- Page 138
We review the adequacy of this reserve quarterly based on actual experience. As long as our expected future losses
remain consistent with prior projections, the results of the discontinued products are applied against the reserve and
do not impact net income attributable to Aetna. If actual or expected future losses are greater than we currently
estimate, we may increase the reserve, which could adversely impact net income attributable to Aetna. If actual or
expected future losses are less than we currently estimate, we may decrease the reserve, which could favorably
impact net income attributable to Aetna. As a result of this review, $55.9 million ($86.0 million pretax) of the
reserve was released during 2013. This reserve release was primarily due to favorable investment performance as
well as favorable retirement experience compared to assumptions we previously made in estimating the reserve.
The reserve at each of December 31, 2013 and December 31, 2012 reflects management's best estimate of
anticipated future losses, and is included in future policy benefits on our balance sheet.
The activity in the reserve for anticipated future losses on discontinued products in 2013, 2012 and 2011 was as
follows (pretax):
(Millions) 2013 2012 2011
Reserve, beginning of period $ 978.5 $ 896.3 $ 884.8
Operating income (loss) 1.0 (2.0) (16.9)
Net realized capital gains 86.0 84.2 28.4
Reserve reduction (86.0) — —
Reserve, end of period $ 979.5 $ 978.5 $ 896.3
In 2013, our discontinued products reflected net realized capital gains, primarily attributable to gains from the sale
of other investments and from the sale of debt and equity securities. In 2012, our discontinued products reflected net
realized capital gains, primarily attributable to gains from the sale of debt securities partially offset by losses from
other investments. In 2011, our discontinued products reflected net realized capital gains, primarily attributable to
gains from the sale of debt securities partially offset by losses from derivative transactions. In addition, during 2012
and 2011, our discontinued products also reflected operating losses. We evaluated these 2013 results against the
expectations of future cash flows assumed in estimating the reserve and do not believe that an adjustment to the
reserve was required at December 31, 2013.
The anticipated run-off of the discontinued products reserve balance at December 31, 2013 (assuming that assets
are held until maturity and that the reserve run-off is proportional to the liability run-off) is as follows:
(Millions)
2014 $ 54.2
2015 52.9
2016 51.3
2017 49.7
2018 48.0
Thereafter 723.4