Aetna 2014 Annual Report Download - page 142
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Annual Report- Page 136
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, 2014 and 2013 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 2014, 2013 and 2012 was as
follows (pretax):
(Millions) 2014 2013 2012
Reserve, beginning of period $ 979.5 $ 978.5 $ 896.3
Operating income (loss) 6.0 1.0 (2.0)
Net realized capital gains 29.2 86.0 84.2
Reserve reduction —(86.0) —
Reserve, end of period $ 1,014.7 $ 979.5 $ 978.5
During 2014, our discontinued products reflected operating income and net realized capital gains, primarily
attributable to gains from the sale of debt securities. In 2013, our discontinued products reflected operating income
and 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 operating losses and net realized capital
gains, primarily attributable to gains from the sale of debt securities partially offset by losses from other
investments. We evaluated these 2014 results against the expectations of future cash flows assumed in estimating
the reserve for anticipated future losses and do not believe that an adjustment to the reserve was required at
December 31, 2014.
The anticipated run-off of the discontinued products reserve balance at December 31, 2014 (assuming that assets
are held until maturity and that the reserve run-off is proportional to the liability run-off) is as follows:
(Millions)
2015 $ 53.9
2016 52.9
2017 51.6
2018 50.2
2019 48.7
Thereafter 757.4