Aetna 2013 Annual Report Download - page 135

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Annual Report- Page 129
In addition to the common stock disclosed on our balance sheets, approximately 8 million shares of Class A voting
preferred stock, $.01 par value per share, have been authorized. At December 31, 2013, there were also
approximately 423 million undesignated shares that our Board has the power to divide into such classes and series,
with such voting rights, designations, preferences, limitations and special rights as our Board determines.
16. Dividend Restrictions and Statutory Surplus
Our business operations are conducted through subsidiaries that principally consist of HMOs and insurance
companies. In addition to general state law restrictions on payments of dividends and other distributions to
shareholders applicable to all corporations, HMOs and insurance companies are subject to further regulations that,
among other things, may require those companies to maintain certain levels of equity and restrict the amount of
dividends and other distributions that may be paid to their equity holders. The additional regulations applicable to
our HMO and insurance company subsidiaries are not expected to affect our ability to service our debt, meet our
other financing obligations or pay dividends.
Under applicable regulatory requirements, at December 31, 2013, the amount of dividends that may be paid by our
insurance and HMO subsidiaries without prior approval by regulatory authorities was approximately $1.6 billion in
the aggregate. There are no such restrictions on distributions from Aetna to its shareholders. During 2013, our
insurance and HMO subsidiaries paid approximately $2.2 billion of dividends to the Company.
The combined statutory net income for the years ended and combined statutory capital and surplus at
December 31, 2013, 2012 and 2011 for our insurance and HMO subsidiaries were as follows:
(Millions) 2013 2012 2011
Statutory net income $ 1,750.1 $ 1,813.7 $ 1,871.7
Statutory capital and surplus 8,431.0 6,372.8 5,938.6
17. Reinsurance
Effective October 1, 1998, we reinsured certain policyholder liabilities and obligations related to individual life
insurance (in conjunction with our former parent company's sale of this business). These transactions were in the
form of indemnity reinsurance arrangements, whereby the assuming companies contractually assumed certain
policyholder liabilities and obligations, although we remain directly obligated to policyholders. The liability
related to our obligation is recorded in future policy benefits and policyholders' funds on our balance sheets.
Assets related to and supporting these policies were transferred to the assuming companies, and we recorded a
reinsurance recoverable.
There is not a material difference between premiums on a written basis versus an earned basis. Reinsurance
recoveries were approximately $110 million, $98 million and $83 million in 2013, 2012 and 2011, respectively.
Reinsurance recoverables related to these obligations were approximately $793 million at December 31, 2013,
approximately $919 million at December 31, 2012 and approximately $955 million at December 31, 2011. At
December 31, 2013, reinsurance recoverables with a carrying value of approximately $736 million were associated
with two reinsurers.
Effective January 1, 2012, we renewed our agreement with an unrelated insurer to reinsure fifty percent of our
group term life and group accidental death and dismemberment insurance policies. During 2012 and 2011, we
entered into agreements to reinsure certain Health Care insurance policies. We entered into these contracts to
reduce the risk of catastrophic loss which in turn reduces our capital and surplus requirements. These contracts did
not qualify for reinsurance accounting under GAAP, and consequently are accounted for using deposit accounting.
Effective 2013, 2012 and 2011, we entered into certain three or four-year reinsurance agreements with unrelated
insurers (Vitality Re IV, Vitality Re III, Vitality Re II and Vitality Re Limited). At December 31, 2013, 2012 and
2011, these agreements allowed us to reduce our required capital and provided an aggregate of $690 million, $540