Aetna Announces Transaction with Vitality Re VI

HARTFORD, Conn.--(BUSINESS WIRE)-- Aetna (NYSE: AET) today announced that it has entered into a three-year reinsurance arrangement with Vitality Re VI Limited as part of its long-term capital management strategy. The arrangement allows Aetna to reduce its required capital and provides $200 million of collateralized excess of loss reinsurance coverage on a portion of Aetna’s group commercial health insurance business.¹ Vitality Re VI is a newly formed insurance company which issued health insurance-linked notes in a private offering in connection with this transaction.

Aetna’s reinsurance arrangements with Vitality Re III Limited expired on Wednesday, January 7, 2015.

“Today’s transaction, which essentially replaces the Vitality Re III arrangement, marks the successful completion of our sixth such reinsurance arrangement,” said Aetna’s Treasurer David Buda. “This reinsurance arrangement improves our capital efficiency and reduces our weighted average cost of capital.”

About Aetna

Aetna is one of the nation's leading diversified health care benefits companies, serving an estimated 46 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, Medicaid health care management services, workers' compensation administrative services and health information technology products and services. Aetna's customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups and expatriates. For more information, see www.aetna.com and learn about how Aetna is helping to build a healthier world. @aetna

¹Amounts payable under the reinsurance arrangements 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 applicable reinsurance arrangement. The principal amount of the Vitality Re VI 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 VI under the reinsurance arrangement if the MBR of the covered business for calendar year 2015 reaches an initial attachment point of 94%. The full $200 million of coverage would be paid to Aetna if the MBR of the covered business reaches an initial exhaustion point of 114% for calendar year 2015. The attachment and exhaustion points will be reset annually for 2016 and 2017 to maintain modeled probabilities of attachment and expected loss on the Vitality Re VI notes equal to the initial modeled probabilities of attachment and expected loss.