Aetna 2013 Annual Report Download - page 111

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Annual Report- Page 105
Mortgage Loans
Our mortgage loans are collateralized by commercial real estate. During 2013 and 2012 we had the following
activity in our mortgage loan portfolio:
(Millions) 2013 2012
New mortgage loans $ 195.0 $ 177.0
Mortgage loans fully-repaid 222.0 106.5
Mortgage loans foreclosed 8.5 16.7
At December 31, 2013 and 2012, we had no material problem, restructured or potential problem mortgage loans.
We also had no material impairment reserves on these loans at December 31, 2013 or 2012.
We assess our mortgage loans on a regular basis for credit impairments, and annually assign a credit quality
indicator to each loan. Our credit quality indicator is internally developed and categorizes our portfolio on a scale
from 1 to 7. Category 1 represents loans of superior quality, and Categories 6 and 7 represent loans where
collections are at risk. The vast majority of our mortgage loans fall into the Level 2 to 4 ratings. These ratings
represent loans where credit risk is minimal to acceptable; however, these loans may display some susceptibility to
economic changes. Category 5 represents loans where credit risk is not substantial but these loans warrant
management’s close attention. These indicators are based upon several factors, including current loan to value
ratios, property condition, market trends, credit worthiness of the borrower and deal structure. Based upon our most
recent assessments at December 31, 2013 and 2012, our mortgage loans were given the following credit quality
indicators:
(In Millions, except credit ratings indicator) 2013 2012
1$ 69.2 $ 94.0
2 to 4 1,399.6 1,451.1
530.6 60.2
6 and 7 50.2 38.3
Total $ 1,549.6 $ 1,643.6
At December 31, 2013 scheduled mortgage loan principal repayments were as follows:
(Millions)
2014 $ 84.3
2015 144.9
2016 242.8
2017 174.9
2018 160.6
Thereafter 750.8
Variable Interest Entities
In determining whether to consolidate a variable interest entity (“VIE”), we consider several factors including
whether we have the power to direct activities, the obligation to absorb losses and the right to receive benefits that
could potentially be significant to the VIE. We have relationships with certain real estate partnerships and one
hedge fund partnership that are considered VIEs, but are not consolidated. We record the amount of our investment
in these partnerships as long-term investments on our balance sheets and recognize our share of partnership income
or losses in earnings. Our maximum exposure to loss as a result of our investment in these partnerships is our
investment balance at December 31, 2013 and 2012 of approximately $205 million and $215 million, respectively,
and the risk of recapture of tax credits related to the real estate partnerships previously recognized, which we do not
consider significant. We do not have a future obligation to fund losses or debts on behalf of these investments;
however, we may voluntarily contribute funds. The real estate partnerships construct, own and manage low-income
housing developments and had total assets of approximately $5.8 billion and $5.4 billion at December 31, 2013 and