Aetna 2009 Annual Report Download - page 69

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The components of our pension and OPEB plans included the following activity in accumulated other comprehensive
loss in 2009 and 2008:
Unrecognized Unrecognized Unrecognized Unrecognized
Prior Service Prior Service
(Millions) Losses Costs Losses Costs Total
Balance at December 31, 2007 (348.7)$ 13.4$ (47.1)$
33.7$
(348.7)$
Unrealized net losses arising during
the period ($1,991.7 pretax) (1,286.4) - (10.2)
-
(1,296.6)
Reclassification to earnings ($3.1 pretax) 4.1 (1.4) 1.7 (2.4) 2.0
Balance at December 31, 2008 (1,631.0) 12.0 (55.6) 31.3 (1,643.3)
Unrealized net losses arising during
the period ($123.2 pretax) (72.5) - (7.6)
-
(80.1)
Reclassification to earnings ($214.0 pretax) 140.7 (1.4) 2.2 (2.4) 139.1
Balance at December 31, 2009 (1,562.8)$ 10.6$ (61.0)$ 28.9$ (1,584.3)$
Pension Plans OPEB Plans
Net Actuarial Net Actuarial
10. Financial Instruments
The preparation of our consolidated financial statements in accordance with GAAP requires certain of our assets and
liabilities to be reflected at their fair value, and others on another basis, such as an adjusted historical cost basis. In this
note, we provide details on the fair value of financial assets and liabilities and how we determine those fair values. We
present this information for those instruments that are reported at fair value for which the change in fair value impacts
net income or other comprehensive income separately from other financial assets and liabilities.
Financial Instruments Measured at Fair Value in our Balance Sheets
Certain of our financial instruments are measured at fair value in our balance sheet. The fair values of these
instruments are based on valuations that include inputs that can be classified within one of three levels of a hierarchy
established by GAAP. The following are the levels of the hierarchy and a brief description of the type of valuation
information (“inputs”) that qualifies a financial asset or liability for each level:
o Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.
o Level 2 – Inputs other than Level 1 that are based on observable market data. These include: quoted prices
for similar assets in active markets, quoted prices for identical assets in inactive markets, inputs that are
observable that are not prices (such as interest rates, credit risks, etc.) and inputs that are derived from or
corroborated by observable markets.
o Level 3 – Developed from unobservable data, reflecting our own assumptions.
Financial assets and liabilities are classified based upon the lowest level of input that is significant to the valuation.
When quoted prices in active markets for identical assets and liabilities are available, we use these quoted market
prices to determine the fair value of financial assets and liabilities and classify these assets and liabilities as Level 1. In
other cases where a quoted market price for identical assets and liabilities in an active market is either not available or
not observable, we estimate fair value using valuation methodologies based on available and observable market
information or by using a matrix pricing model. These financial assets and liabilities would then be classified as Level
2. If quoted market prices are not available, we determine fair value using broker quotes or an internal analysis of each
investment’ s financial performance and cash flow projections. Thus, financial assets and liabilities may be classified
in Level 3 even though there may be some significant inputs that may be readily available.
The following is a description of the valuation methodologies used for our financial assets and liabilities that are
measured at fair value, including the general classification of such assets and liabilities pursuant to the valuation
hierarchy.
Debt Securities - Where quoted prices are available in an active market, our debt securities are classified in
Level 1 of the fair value hierarchy. Our Level 1 debt securities are comprised primarily of U.S. government
securities. If Level 1 valuations are not available, the fair value is determined using models such as matrix
pricing, which uses quoted market prices of debt securities with similar characteristics or discounted cash flows
to estimate fair value. We obtained one price for each of our Level 2 debt securities and did not adjust any of
these prices at December 31, 2009.
Annual Report – Page 63