Aetna Announces Transaction with Vitality Re III

Aetna (NYSE: AET) today announced that it has entered into a three-year reinsurance arrangement with Vitality Re III Limited as part of its long-term capital management strategy. The arrangement allows Aetna to reduce its required capital and provides $150 million of collateralized excess of loss reinsurance coverage on a portion of Aetna’s group commercial health insurance business.1 Vitality Re III is a newly formed insurance company which issued health insurance-linked notes in a private offering in connection with this transaction.

“We have successfully completed our third reinsurance transaction that provides catastrophic risk protection, improves our capital efficiency and reduces our weighted average cost of capital,” said Joseph M. Zubretsky, senior executive vice president and CFO. “This transaction allows Aetna to free up additional capital held for the covered commercial health insurance business, and deploy it in an accretive manner.”

About Aetna

Aetna is one of the nation's leading diversified health care benefits companies, serving approximately 36.3 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities and health care management services for Medicaid plans. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, governmental units, government-sponsored plans, labor groups and expatriates. For more information, see www.aetna.com.

1 Amounts payable under the reinsurance arrangement are based on the annual medical benefit ratio (“MBR”) of a portion of Aetna Life Insurance Company’s group commercial PPO, POS and indemnity business compared to a threshold attachment point specified in the reinsurance arrangement. The principal amount of the Vitality Re III notes, which are non-recourse to Aetna, and the coverage available under the reinsurance arrangement will be reduced by any payments to Aetna under the reinsurance arrangement. Aetna will be entitled to begin to receive payments from Vitality Re III under the reinsurance arrangement if the MBR of the covered business for calendar year 2012 reaches an initial attachment point of 97%. The full $150 million of coverage would be paid to Aetna if the MBR of the covered business reaches an initial exhaustion point of 117% for calendar year 2012. The attachment and exhaustion points will be reset annually for 2013 and 2014 to maintain modeled probabilities of attachment and expected loss on the Vitality Re III notes equal to the initial modeled probabilities of attachment and expected loss.

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