Aetna 2015 Annual Report Download - page 31

Annual Report- Page 25
At December 31, 2015, our pension and OPEB plans had aggregate pretax accumulated actuarial losses of
approximately $2.5 billion. Accumulated actuarial losses are primarily due to lower interest rates and improving
mortality trends that have increased the present value of future plan obligations and investments losses in 2008.
The accumulated actuarial loss is amortized over the weighted-average expected life of pension plan participants
(estimated to be up to 29 years at December 31, 2015 for the pension plans) and the expected life of OPEB plan
participants (estimated to be up to 17 years at December 31, 2015) to the extent the loss is outside of a corridor
established in accordance with GAAP. The corridor is established based on the greater of 10% of the plan assets or
10% of the projected benefit obligation. At December 31, 2015, approximately $1.8 billion of the actuarial loss was
outside of the corridor, which will result in amortization of $41 million after-tax in our 2016 pension and OPEB
expense.
The expected return on plan assets and discount rate assumptions discussed above impacted the reported net
periodic benefit costs and benefit obligations of our pension and OPEB plans, but did not impact the required
contributions to these plans, if any. Refer to Note 12 of Notes to Consolidated Financial Statements beginning on
page 118 for additional information on our defined benefit pension and other postretirement employee benefit plans,
including our current funding strategy.
Other-Than-Temporary Impairment of Debt Securities
We regularly review our debt securities to determine whether a decline in fair value below the carrying value is
other than temporary. If a decline in fair value is considered other than temporary, the cost basis or carrying amount
of the debt security is written down. The write-down is then bifurcated into its credit and non-credit related
components. The amount of the credit-related component is included in our operating results, and the amount of the
non-credit related component is included in other comprehensive income, unless we intend to sell the security or it
is more likely than not that we will be required to sell the security prior to its anticipated recovery of its amortized
cost basis. We analyze all facts and circumstances we believe are relevant for each investment when performing this
analysis, in accordance with applicable accounting guidance promulgated by the Financial Accounting Standards
Board and the U.S. Securities and Exchange Commission (the “SEC”).
Among the factors we consider in evaluating whether a decline is other-than-temporary are whether the decline in
fair value results from a change in the quality of the debt security itself, whether the decline results from a
downward movement in the market as a whole, and the prospects for realizing the carrying value of the debt
security based on the investment’s current and short-term prospects for recovery. For unrealized losses determined
to be the result of market conditions (for example, increasing interest rates and volatility due to conditions in the
overall market) or industry-related events, we determine whether we intend to sell the debt security or if it is more
likely than not that we will be required to sell the debt security before recovery of its amortized cost basis. If either
case is true, we recognize an other-than-temporary impairment, and the cost basis/carrying amount of the debt
security is written down to fair value.
Debt securities in an unrealized loss position for which we believe we will not recover the amortized cost due to the
quality of the debt security or the creditworthiness of the issuer are categorized as credit-related OTTI.
The risks inherent in assessing the impairment of a debt security include the risk that market factors may differ from
our projections and the risk that facts and circumstances factored into our assessment may change with the passage
of time. Unexpected changes to market factors and circumstances that were not present in past reporting periods
are among the factors that may result in a current period decision to sell debt securities that were not impaired in
prior reporting periods.
Revenue Recognition and Allowance for Estimated Terminations and Uncollectible Accounts
Our revenue is principally derived from premiums and fees billed to customers in the Health Care and Group
Insurance businesses. In Health Care, revenue is recognized based on customer billings, which reflect contracted
rates per employee and the number of covered employees recorded in our records at the time the billings are
prepared. Billings are generally sent monthly for coverage during the following month. In Group Insurance,