Aetna 2006 Annual Report Download - page 73

Our pension plans invest in a diversified mix of traditional asset classes. Investments in U.S. and international
equity securities, fixed income securities, real estate and cash are intended to maximize long-term returns while
recognizing the need for adequate liquidity to meet on-going benefit and administrative obligations. Risk tolerance
of unexpected investment and actuarial outcomes is continually evaluated by understanding the pension plan’ s
liability characteristics. This evaluation is performed through forecasting and assessing ranges of investment
outcomes over short and long-term horizons, and by assessing our financial condition and our future potential
obligations from both the pension and general corporate perspectives. Complementary investment styles, such as
growth and value equity investing techniques, are utilized by multiple investment advisors to further improve
portfolio and operational risk characteristics. Equity investments, both active and passively managed, are used
primarily to increase overall plan returns. Real estate investments are viewed favorably for their diversification
benefits and above-average dividend generation. Fixed income investments provide diversification benefits and
liability hedging attributes that are desirable, especially in falling interest rate environments.
Asset allocations and investment performance are formally reviewed quarterly by the plan’ s Benefit Finance
Committee. Forecasting of asset and liability growth is performed at least annually. More thorough analysis of
assets and liabilities are also performed periodically.
We have several benefit plans for retired employees currently supported by the OPEB plan assets. OPEB plan
assets are directly and indirectly invested in a diversified mix of traditional asset classes, primarily high-quality
fixed income securities.
The expected long-term rate of return is estimated based on many factors including the expected forecast for
inflation, risk premiums for each asset class, expected asset allocation, current and future financial market
conditions, and diversification and rebalancing strategies. Historical return patterns and correlations, consensus
return forecasts and other relevant financial factors are analyzed to check for reasonability and appropriateness.
Our current funding strategy is to fund an amount at least equal to the minimum funding requirement as determined
under applicable regulatory requirements with consideration of factors such as the maximum tax deductibility of
such amounts. We may elect to voluntarily contribute amounts to our tax-qualified pension plan. We do not have
any regulatory contribution requirements for 2007; however, we intend to make a voluntary contribution of
approximately $45 million to the Aetna Pension Plan in 2007. Employer contributions related to the Supplemental
Pension Plan and OPEB plans represent payments to retirees for current benefits. We have no plans to return any
plan assets to the Company in 2007.
Expected benefit payments, which reflect future employee service, as appropriate, of the pension and OPEB plans
to be paid for each of the next five years and in the aggregate for the next five years thereafter, at December 31,
2006 were as follows:
(Millions)
2007 289.7$ 36.6$
2008 294.7 35.7
2009 301.1 34.9
2010 306.6 34.1
2011 413.9 33.1
2012-2016 1,798.2 145.6
Pension Plans OPEB Plans
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