Aetna 2015 Annual Report Download - page 138

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Annual Report- Page 132
2015 was $824 million. At both December 31, 2015 and 2014, we did not have any outstanding borrowings from
the FHLBB.
Early Extinguishment of Long-Term Debt
November 2014
On November 3, 2014, we announced the redemption for cash of the entire $495.6 million aggregate principal
amount outstanding of our 6.50% senior notes due 2018. The redemption of these notes occurred on December 3,
2014 (the “December Redemption Date”) at a redemption price that included a make-whole premium, plus interest
accrued and unpaid at the December Redemption Date. We financed the redemption by issuing $750 million of
3.5% senior notes due 2024 (the “November 2014 Senior Notes”). As a result of the redemption, in the fourth
quarter of 2014, we recorded a loss on the early extinguishment of long-term debt of $58.1 million ($89.3 million
pretax).
In April 2014, we entered into an interest rate swap with a notional value of $250 million. We designated this swap
as a cash flow hedge against interest rate exposure related to the forecasted future issuance of fixed-rate debt to be
primarily used to refinance long-term debt maturing in 2018. In November 2014, prior to issuing the November
2014 Senior Notes used to refinance our 6.50% senior notes due 2018 and for general corporate purposes, we
terminated this swap and paid an aggregate of $15.2 million to the swap counterparty upon termination. We
performed a final effectiveness test upon termination of this swap and determined there was $3 million pretax of
ineffectiveness that arose due to the actual debt issuance date being earlier than forecasted. The ineffectiveness was
recorded as a realized capital loss in the fourth quarter of 2014. The effective portion of the hedge loss of $12
million pretax was recorded in accumulated other comprehensive loss, net of tax, and is being amortized as an
increase to interest expense over the first 20 semi-annual interest payments of the November 2014 Senior Notes.
March 2014
On February 7, 2014, we announced the redemption for cash of the entire $750 million aggregate principal amount
outstanding of our 6.0% senior notes due 2016. The redemption of these notes occurred on March 14, 2014 (the
“March Redemption Date”) at a redemption price that included a make-whole premium, plus interest accrued and
unpaid at the March Redemption Date. We financed the redemption by issuing $375 million of 2.2% senior notes
due 2019 and $375 million of 4.75% senior notes due 2044 (collectively, the “March 2014 Senior Notes”), together
with other available resources. As a result of the redemption, in the first quarter of 2014, we recorded a loss on the
early extinguishment of long-term debt of $59.7 million ($91.9 million pretax).
During June and July 2012, we entered into two interest rate swaps with an aggregate notional value of $375
million. We designated these swaps as cash flow hedges against interest rate exposure related to the forecasted
future issuance of fixed-rate debt to refinance our 6.0% senior notes due 2016. In March 2014, prior to issuing the
March 2014 Senior Notes used to refinance our 6.0% senior notes due 2016, we terminated these swaps and
received an aggregate of $34.2 million from the swap counterparties upon termination. We performed a final
effectiveness test upon termination of these swaps and determined there was $12 million pretax of ineffectiveness
that arose due to the actual debt issuance date being earlier than forecasted. The ineffectiveness was recorded as a
realized capital gain in the first quarter of 2014. The effective portion of the hedge gain of $22 million pretax was
recorded in accumulated other comprehensive loss, net of tax, and is being amortized as a reduction to interest
expense over the first 20 semi-annual interest payments associated with the $375 million of 4.75% senior notes due
2044.
Cash Flow Hedges
In 2015 and 2016, we entered into various interest rate swaps and treasury rate locks with an aggregate notional
value of $3.5 billion. We designated these swaps and treasury rate locks as cash flow hedges against interest rate
exposure related to the forecasted future issuance of fixed-rate debt to be primarily used to finance a portion of the
purchase price of the Proposed Acquisition. At December 31, 2015, the swaps had an immaterial pretax fair value
loss, which was reflected net of tax in accumulated other comprehensive loss within shareholders’ equity.