Aetna 2014 Annual Report Download - page 133

Annual Report- Page 127
Assets related to and supporting these policies were transferred to the assuming companies, and we recorded a
reinsurance recoverable.
There is not a material difference between premiums on a written basis versus an earned basis. Reinsurance
recoveries were approximately $189 million, $110 million and $98 million in 2014, 2013 and 2012, respectively.
Reinsurance recoverables related to these obligations were approximately $1.2 billion at December 31, 2014,
approximately $793 million at December 31, 2013 and approximately $919 million at December 31, 2012. At
December 31, 2014, reinsurance recoverables with a carrying value of approximately $706 million were associated
with two reinsurers. Additionally, at December 31, 2014, we recorded a receivable under Health Care Reform’s
temporary three-year reinsurance program of approximately $338 million. Refer to Note 2 beginning on page 80 for
additional information about Health Care Reform’s temporary three-year reinsurance program.
Effective January 1, 2012, we renewed our agreement with an unrelated insurer to reinsure fifty percent of our
group term life and group accidental death and dismemberment insurance policies. During 2013 and 2012, we
entered into agreements to reinsure certain Health Care insurance policies. We entered into these contracts to
reduce the risk of catastrophic loss which in turn reduces our capital and surplus requirements. These contracts did
not qualify for reinsurance accounting under GAAP, and consequently are accounted for using deposit accounting.
Effective 2014, 2013 and 2012, we entered into certain three to five-year reinsurance agreements with unrelated
insurers (Vitality Re V, Vitality Re IV and Vitality Re III). At December 31, 2014, 2013 and 2012, these agreements
allowed us to reduce our required capital and provided an aggregate of $500 million, $690 million and $540
million, respectively, of collateralized excess of loss reinsurance coverage on a portion of Aetna’s group
Commercial Insured Health Care business.
In May 2013, we entered into two agreements with unrelated reinsurers to reinsure a portion of our Medicare
Advantage business and a portion of our group Commercial Insured Health Care business, respectively. These
contracts did not qualify for reinsurance accounting under GAAP, and consequently are accounted for using deposit
accounting.
In 2008, as a result of the liquidation proceedings of Lehman Re, a subsidiary of Lehman Brothers Holdings Inc.,
we recorded an allowance against our reinsurance recoverable from Lehman Re of $27.4 million ($42.2 million
pretax). This reinsurance was placed in 1999 and was on a closed book of paid-up group whole life insurance
business. In September 2008, we took possession of assets supporting the reinsurance recoverable, which
previously were held as collateral in a trust. In 2013, we sold our claim against Lehman Re to an unrelated third
party (including the reinsurance recoverable) and terminated the reinsurance arrangement. Upon the sale of the
claim and termination of the arrangement, we reversed the related allowance thereby reducing other general and
administrative expenses by $27.4 million ($42.2 million pretax) and recognized a $4.7 million ($7.2 million pretax)
gain on the sale in fees and other revenue.
18. Commitments and Contingencies
Guarantees
We have the following significant guarantee and indemnification arrangements at December 31, 2014.
• ASC Claim Funding Accounts - We have arrangements with certain banks for the processing of claim
payments for our ASC customers. The banks maintain accounts to fund claims of our ASC customers. The
customer is responsible for funding the amount paid by the bank each day. In these arrangements, we
guarantee that the banks will not sustain losses if the responsible ASC customer does not properly fund its
account. The aggregate maximum exposure under these arrangements is $250 million. We can limit our
exposure to this guarantee by suspending the payment of claims for ASC customers that have not
adequately funded the amount paid by the bank.