DEF 14A 1 y89007def14a.htm DEF 14A def14a
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A INFORMATION
 
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
 
Filed by the Registrant þ
 Filed by a Party other than the Registrant  o
Check the appropriate box:
o  Preliminary Proxy Statement
o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ  Definitive Proxy Statement
o  Definitive Additional Materials
o  Soliciting Material Pursuant to §240.14a-12
 
AETNA INC.
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
þ   No fee required.
 
o   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
  (1)   Title of each class of securities to which transaction applies:
 
 
  (2)   Aggregate number of securities to which transaction applies:
 
 
  (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
  (4)   Proposed maximum aggregate value of transaction:
 
 
  (5)   Total fee paid:
 
 
  o   Fee paid previously with preliminary materials.
 
o   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
  (1)   Amount Previously Paid:
 
 
  (2)   Form, Schedule or Registration Statement No.:
 
 
  (3)   Filing Party:
 
 
  (4)   Date Filed:
 


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(AETNA LOGO)
 
 
 
 
2011 Aetna Inc.
Notice of Annual Meeting and
Proxy Statement
 


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(AETNA LOGO)   Aetna Inc.
151 Farmington Avenue
Hartford, Connecticut 06156
  Mark T. Bertolini
Chairman, Chief Executive Officer and
President
 
To Our Shareholders:
 
Aetna Inc.’s 2011 Annual Meeting of Shareholders will be held on Friday, May 20, 2011, at 9:30 a.m. Eastern time at Le Méridien Philadelphia in Philadelphia, Pennsylvania. We hope you will attend.
 
 
This booklet includes the Notice of the Annual Meeting and Aetna’s 2011 Proxy Statement. The Proxy Statement provides information about Aetna and describes the business we will conduct at the meeting.
 
 
At the meeting, in addition to specific agenda items, we will discuss generally the operations of Aetna. We welcome any questions you have concerning Aetna and will provide time during the meeting for questions from shareholders.
 
 
If you are unable to attend the Annual Meeting, it is still important that your shares be represented. Please vote your shares promptly.
 
 
Mark T. Bertolini
Chairman, Chief Executive Officer
and President
April 11, 2011


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(AETNA LOGO)   Aetna Inc.
151 Farmington Avenue
Hartford, Connecticut 06156
  Judith H. Jones
Vice President and
Corporate Secretary
 
Notice of Annual Meeting of Shareholders of Aetna Inc.
 
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Aetna Inc. will be held at Le Méridien Philadelphia in Philadelphia, Pennsylvania on Friday, May 20, 2011, at 9:30 a.m. Eastern time for the following purposes:
 
1.   To elect as Directors of Aetna Inc. the 12 nominees named in this Proxy Statement;
 
2.   To approve the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2011;
 
3.   To approve the proposed amendment of the Aetna Inc. 2010 Stock Incentive Plan to increase the number of shares authorized to be issued under the Plan;
 
4.   To approve the proposed Aetna Inc. 2011 Employee Stock Purchase Plan;
 
5.   To take a non-binding advisory vote on executive compensation;
 
6.   To take a non-binding advisory vote on the frequency of the vote on executive compensation;
 
7.   To consider and act on two shareholder proposals, if properly presented at the meeting; and
 
8.   To transact any other business that may properly come before the Annual Meeting or any adjournment thereof.
 
The Board of Directors has fixed the close of business on March 18, 2011 as the record date for determination of the shareholders entitled to vote at the Annual Meeting or any adjournment thereof.
 
The Annual Meeting is open to all shareholders as of the record date, the close of business on the March 18, 2011, or their authorized representatives. Parking is available at Le Méridien Philadelphia, or public parking is available in the vicinity. See the following page for directions to Le Méridien Philadelphia.
 
We ask that you signify your intention to attend the Annual Meeting by checking the appropriate box on your proxy card or voting instruction card. Instead of issuing an admission ticket, we will place your name on a shareholder attendee list, and you will be asked to register and present government issued photo identification (for example, a driver’s license or passport) before being admitted to the Annual Meeting. If you hold your shares through a stockbroker, bank or other holder of record and plan to attend, you must send a written request to attend along with proof that you owned the shares as of the record date (the close of business on March 18, 2011) (such as a copy of your brokerage or bank account statement for the period including March 18, 2011) to Aetna’s Corporate Secretary at 151 Farmington Avenue, RC61, Hartford, CT 06156. The Annual Meeting will be audiocast live on the Internet at www.aetna.com/investor.
 
It is important that your shares be represented and voted at the Annual Meeting. You can vote your shares by one of the following methods: vote by Internet or by telephone using the instructions on the enclosed proxy card (if these options are available to you), or mark, sign, date and promptly return the enclosed proxy card in the postage-paid envelope furnished for that purpose. If you attend the Annual Meeting, you may vote in person if you wish, even if you have voted previously.
 
This Notice of Annual Meeting and Proxy Statement and the Company’s 2010 Annual Report, Financial Report to Shareholders are available on Aetna’s Internet website at www.aetna.com/proxymaterials.
 
By order of the Board of Directors,
 
-s- Judith H. Jones
 
Judith H. Jones
Vice President and Corporate Secretary
April 11, 2011


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DIRECTIONS TO LE MÉRIDIEN PHILADELPHIA
 
1421 Arch Street
Philadelphia, PA 19102
 
FROM NEW JERSEY TURNPIKE (EAST)
 
•  Follow turnpike to Exit 4.
 
•  Follow Route 73 North.
 
•  Continue on Route 38 West to Route 30 West.
 
•  Follow signs to the Benjamin Franklin Bridge.
 
•  After the bridge, continue right to 6th Street and turn right onto Arch Street.
 
FROM NORTH
 
•  Take Interstate 95 South to Interstate 676 West.
 
•  Exit PA 611/Broad Street/Central.
 
•  Exit right onto 15th Street.
 
•  Turn left onto Race Street.
 
•  Turn right onto Broad Street.
 
•  Turn left onto Arch Street.
 
FROM THE PENNSYLVANIA TURNPIKE (WEST)
 
•  Take Exit 24 (Valley Forge and Central Philadelphia).
 
•  Follow Interstate 76 East to Exit 38 for Interstate 676.
 
•  Take the Broad Street Exit and stay to the right on 15th Street.
 
•  Turn right onto Arch Street.
 
FROM PHILADELPHIA INTERNATIONAL AIRPORT (SOUTH)
 
•  Take Interstate 95 North to Interstate 76 West.
 
•  Take Exit 39 (30th Street Station).
 
•  Continue 2 blocks.
 
•  Turn right onto Market Street.
 
•  Turn left onto 16th Street.
 
•  Turn right onto Race Street.
 
•  Turn right onto 15th Street.
 
•  Turn right onto Arch Street.


 

Table of Contents
 
 
         
        Page
 
 
  1
  1
  10
    Aetna’s Corporate Governance Guidelines   10
    Aetna’s Board of Directors   10
    Director Elections — Majority Voting Standard   10
    Director Retirement Age   11
    Executive Sessions   11
    Board Leadership Structure and the Presiding Director   11
    Communications with the Board   11
    Director Independence   12
    Compensation Committee Interlocks and Insider Participation   14
    Meeting Attendance   14
    Aetna’s Code of Conduct   14
    Related Party Transaction Policy   14
    Board’s Role in the Oversight of Risk   15
    Board and Committee Membership; Committee Descriptions   15
    Consideration of Director Nominees   18
I.
  Election of Directors   20
    Nominees for Directorships   20
    Other Director Information   32
    Director Compensation Philosophy and Elements   32
    Director Stock Ownership Guidelines   32
    2010 Nonmanagement Director Compensation   33
    2010 Director Compensation Table   33
    Additional Director Compensation Information   35
    Certain Transactions and Relationships   37
    Section 16(a) Beneficial Ownership Reporting Compliance   37
    Security Ownership of Certain Beneficial Owners, Directors, Nominees and Executive Officers   37
    Beneficial Ownership Table   38
    Compensation Discussion and Analysis   41
    Executive Compensation   56
      2010 Summary Compensation Table   56
      2010 Grants of Plan-Based Awards Table   58
      Outstanding Equity Awards at 2010 Fiscal Year-End Table   60
      2010 Option Exercises and Stock Vested Table   62
      2010 Pension Benefits Table   62
      Pension Plan Narrative   63
      2010 Nonqualified Deferred Compensation Table   64
      Deferred Compensation Narrative   65
      Potential Post-Employment Payments   66
    Equity Compensation Plans   76
    Compensation Committee Report   77
    Report of the Audit Committee   78
II.
  Appointment of Independent Registered Public Accounting Firm   80
  Approval of the Amendment of the Aetna Inc. 2010 Stock Incentive Plan to Increase the Number of Shares Authorized to be Issued Under the Plan   82
IV.
  Approval of Aetna Inc. 2011 Employee Stock Purchase Plan   92
V.
  Non-Binding Advisory Vote on Executive Compensation   95
VI.
  Non-Binding Advisory Vote on the Frequency of the Vote on Executive Compensation   96
  Shareholder Proposals   97
  100
  A-1
  B-1
  C-1


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AETNA INC.
151 FARMINGTON AVENUE, HARTFORD, CONNECTICUT 06156
APRIL 11, 2011
 
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, MAY 20, 2011
 
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE SHAREHOLDER MEETING TO BE HELD ON MAY 20, 2011
 
This Proxy Statement and the related 2010 Annual Report, Financial Report to Shareholders are available at www.aetna.com/proxymaterials.
 
Among other things, the “Questions and Answers about the Proxy Materials and the Annual Meeting” section of this Proxy Statement contains information regarding:
 
•  The date, time and location of the Annual Meeting;
 
•  A list of the matters being submitted to shareholders for vote and the recommendations of the Board of Directors of Aetna Inc., if any, regarding each of those matters; and
 
•  Information about attending the Annual Meeting and voting in person.
 
Any control/identification number that a shareholder needs to access his or her form of proxy or voting instruction card is included with his or her proxy or voting instruction card.
 
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND
THE ANNUAL MEETING
 
Q:   WHY AM I RECEIVING THESE MATERIALS?
 
A: The Board of Directors (the “Board”) of Aetna Inc. (“Aetna”) is providing these proxy materials to you in connection with the solicitation by the Board of proxies to be voted at Aetna’s Annual Meeting of Shareholders that will take place on May 20, 2011, and any adjournments or postponements of the Annual Meeting. You are invited to attend the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement. These proxy materials and the enclosed proxy card are being mailed to shareholders on or about April 11, 2011.
 
Q:   WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?
 
A: This Proxy Statement provides you with information about Aetna’s governance structure, our Director nominating process, the proposals to be voted on at the Annual Meeting, the voting process, the compensation of our Directors and our named executive officers, and certain other required information.
 
Q:   WHAT PROPOSALS WILL BE VOTED ON AT THE ANNUAL MEETING?
 
A: There are eight items scheduled to be voted on at the Annual Meeting:
 
  •  Election of the 12 nominees named in this Proxy Statement as Directors of Aetna for the coming year.
 
  •  Approval of the appointment of KPMG LLP as the independent registered public accounting firm of Aetna and its subsidiaries (collectively, the “Company”) for the year 2011.
 
  •  Approval of the proposed amendment of the Aetna Inc. 2010 Stock Incentive Plan to increase the number of shares authorized to be issued under the Plan.
 
  •  Approval of the proposed Aetna Inc. 2011 Employee Stock Purchase Plan.
 
 
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  •  A Non-Binding Advisory Vote on Executive Compensation.
 
  •  A Non-Binding Advisory Vote on the Frequency of the Vote on Executive Compensation.
 
  •  Consideration of a shareholder proposal relating to cumulative voting in the election of Directors, if properly presented at the Annual Meeting.
 
  •  Consideration of a shareholder proposal relating to adopting a policy that the Chairman of the Board be an independent director who has not previously served as an executive officer of the Company, if properly presented at the Annual Meeting.
 
Q:   WHAT ARE AETNA’S VOTING RECOMMENDATIONS?
 
A: The Board recommends that you vote your shares FOR each of Aetna’s nominees to the Board; FOR the approval of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2011; FOR the approval of the proposed amendment of the Aetna Inc. 2010 Stock Incentive Plan; FOR the approval of the proposed Aetna Inc. 2011 Employee Stock Purchase Plan; on a non-binding advisory basis, FOR the compensation of Aetna’s Named Executive Officers as disclosed in the Compensation Discussion and Analysis and related disclosures in this Proxy Statement; and AGAINST each of the shareholder proposals. The Board does not have a recommendation with respect to the frequency of the vote on executive compensation.
 
Q:   WHICH OF MY SHARES CAN I VOTE?
 
A: You may vote all Aetna Common Shares, par value $.01 per share (“Common Stock”), you owned as of the close of business on March 18, 2011, the RECORD DATE. These shares include those (1) held directly in your name as the SHAREHOLDER OF RECORD, including shares purchased through Aetna’s DirectSERVICE Investment Program, and (2) held for you as the BENEFICIAL OWNER through a stockbroker, bank or other holder of record.
 
Q:   WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND AS A BENEFICIAL OWNER?
 
A: Many Aetna shareholders hold their shares through a stockbroker, bank or other holder of record rather than directly in their own names. As summarized below, there are some distinctions between shares held of record and those owned beneficially:
 
  •  SHAREHOLDER OF RECORD — If your shares are registered directly in your name with Aetna’s transfer agent, Computershare Trust Company, N.A. (the “Transfer Agent”), you are considered the shareholder of record with respect to those shares, and Aetna is sending these proxy materials directly to you. As the shareholder of record, you have the right to grant your voting proxy to the persons appointed by Aetna or to vote in person at the Annual Meeting. Aetna has enclosed a proxy card for you to use. Any shares held for you under the DirectSERVICE Investment Program are included on the enclosed proxy card.
 
  •  BENEFICIAL OWNER — If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by your broker or other nominee who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker or other nominee on how to vote your shares, and you also are invited to attend the Annual Meeting. However, since you are not the shareholder of record, you may not vote these shares in person at the Annual Meeting unless you bring with you to the Annual Meeting a proxy, executed in your favor, from the shareholder of record. Your broker or other nominee is also obligated to provide you with a voting instruction card for you to use to direct them as to how to vote your shares.
 
 
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Q:   HOW CAN I VOTE MY SHARES BEFORE THE ANNUAL MEETING?
 
A: Whether you hold shares directly as the shareholder of record or beneficially in street name, you may vote before the Annual Meeting by granting a proxy to each of Barbara Hackman Franklin, Gerald Greenwald and Ellen M. Hancock or, for shares you beneficially own, by submitting voting instructions to your broker or other nominee. Most shareholders have a choice of voting by using the Internet, by calling a toll-free telephone number within the United States or Puerto Rico, or by completing a proxy or voting instruction card and mailing it in the postage-paid envelope provided. Please refer to the summary instructions below and carefully follow the instructions included on your proxy card or, for shares you beneficially own, the voting instruction card provided by your broker or other nominee.
 
  •  BY MAIL — You may vote by mail by marking, signing and dating your proxy card or, for shares held in street name, the voting instruction card provided by your broker or other nominee and mailing it in the enclosed, postage-paid envelope. If you provide specific voting instructions, your shares will be voted as you instruct. If you sign and date your proxy or voting instruction card but do not provide instructions, your shares will be voted as described under “WHAT IF I RETURN MY PROXY CARD OR VOTING INSTRUCTION CARD BUT DO NOT PROVIDE VOTING INSTRUCTIONS?” beginning on page 4.
 
  •  BY INTERNET — Go to www.proxyvote.com and follow the instructions. You will need to have your proxy card (or the e-mail message you receive with instructions on how to vote) in hand when you access the website.
 
  •  BY TELEPHONE — Call toll-free on a touchtone telephone 1-800-690-6903 inside the United States or Puerto Rico and follow the instructions. You will need to have your proxy card (or the e-mail message you receive with instructions on how to vote) in hand when you call.
 
The Internet and telephone voting procedures are designed to authenticate shareholders and to allow shareholders to confirm that their instructions have been properly recorded. In order to provide shareholders of record with additional time to vote their shares while still permitting an orderly tabulation of votes, Internet and telephone voting for these shareholders will be available until 11:59 p.m. Eastern time on May 19, 2011.
 
Q:   HOW CAN I VOTE THE SHARES I HOLD THROUGH THE 401(K) PLAN?
 
A: Participants in the Aetna 401(k) Plan (the “401(k) Plan”) who receive this Proxy Statement in their capacity as participants in the 401(k) Plan will receive voting instruction cards instead of proxy cards. The voting instruction card directs the trustee of the 401(k) Plan how to vote the shares. Shares held in the 401(k) Plan may be voted by using the Internet, by calling a toll-free telephone number or by marking, signing and dating the voting instruction card and mailing it in the postage-paid envelope provided. Shares held in the 401(k) Plan for which no instructions are received will be voted by the trustee of the 401(k) Plan in the same percentage as the shares held in the 401(k) Plan for which the trustee receives voting instructions.
 
Q:   HOW CAN I VOTE THE SHARES I HOLD THROUGH THE EXISTING EMPLOYEE STOCK PURCHASE PLAN?
 
A: You hold the Common Stock you acquired through Aetna’s 2006 Employee Stock Purchase Plan (the “Existing ESPP”) as the beneficial owner of shares held in street name. You can vote these shares as described above on page 3 under “HOW CAN I VOTE MY SHARES BEFORE THE ANNUAL MEETING?”
 
Q:   CAN I CHANGE MY VOTE?
 
A: Yes. For shares you hold directly in your name, you may change your vote by (1) signing another proxy card with a later date and delivering it to us before the date of the Annual Meeting, (2) submitting revised votes over the Internet or by telephone before 11:59 p.m. Eastern time on May 19, 2011, or (3) attending the
 
 
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Annual Meeting in person and voting your shares at the Annual Meeting. The last-dated proxy card or Internet or telephone vote will be the only one that counts. Attendance at the Annual Meeting will not cause your previously granted proxy or Internet or telephone vote to be revoked unless you specifically so request. You may revoke your proxy by providing written notice to Aetna’s Corporate Secretary at 151 Farmington Avenue, RW61, Hartford, CT 06156. For shares you hold beneficially, you may change your vote by submitting new voting instructions to your broker or other nominee in a manner that allows your broker or other nominee sufficient time to vote your shares.
 
Q:   CAN I VOTE AT THE ANNUAL MEETING?
 
A: You may vote your shares at the Annual Meeting if you attend in person. You may vote the shares you hold directly in your name by completing a ballot at the Annual Meeting. You may only vote the shares you hold in street name at the Annual Meeting if you bring with you to the Annual Meeting a proxy, executed in your favor, from the shareholder of record. You may not vote shares you hold through the 401(k) Plan at the Annual Meeting.
 
Q:   HOW CAN I VOTE ON EACH PROPOSAL?
 
A: In the election of Directors, you may vote FOR, AGAINST or ABSTAIN with respect to each of the Director nominees. In uncontested elections, Aetna’s Corporate Governance Guidelines require any incumbent Director nominee who receives more “AGAINST” than “FOR” votes to submit his or her resignation for consideration by the Nominating and Corporate Governance Committee (the “Nominating Committee”) and the Board. Please see “Director Elections — Majority Voting Standard” on page 10. For all other proposals, except the non-binding advisory vote on the frequency of a vote on executive compensation, you may vote FOR, AGAINST or ABSTAIN. For the non-binding advisory vote on the frequency of a vote on executive compensation, you may vote to have a vote on executive compensation every 1, 2 or 3 years, or you may ABSTAIN. For a discussion of the votes needed to approve each proposal, see “WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE PROPOSALS, AND HOW WILL VOTES BE COUNTED?” on page 6.
 
Q:   WHAT IF I RETURN MY PROXY CARD OR VOTING INSTRUCTION CARD BUT DO NOT PROVIDE VOTING INSTRUCTIONS?
 
A: If you sign and date your proxy card with no further instructions, your shares will be voted (1) FOR the election as Directors of each of the nominees named on pages 20 through 31 of this Proxy Statement; (2) FOR the approval of KPMG LLP as the Company’s independent registered public accounting firm for 2011; (3) FOR the approval of the proposed amendment of the Aetna Inc. 2010 Stock Incentive Plan to increase the number of shares authorized to be issued under the Plan; (4) FOR the approval of the proposed Aetna Inc. 2011 Employee Stock Purchase Plan; (5) FOR the approval, on a non-binding advisory basis, of the compensation of Aetna’s Named Executive Officers as disclosed in this Proxy Statement; and (6) AGAINST each of the shareholder proposals. If you sign and date your proxy card with no further instructions, your shares will NOT BE VOTED on the non-binding advisory vote on the frequency of the vote on executive compensation.
 
If you sign and date your broker voting instruction card with no further instructions, your shares will be voted as described on your broker voting instruction card.
 
If you sign and date your 401(k) Plan voting instruction card with no further instructions, all shares you hold in the 401(k) Plan will be voted by the trustee of the 401(k) Plan in the same percentage as the shares held in the 401(k) Plan for which the trustee receives voting instructions.
 
 
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Q:   WHAT IF I DON’T RETURN MY PROXY CARD OR VOTING INSTRUCTION CARD AND DON’T VOTE BY INTERNET OR PHONE?
 
A: If you do not return your proxy card or vote by Internet or phone, shares that you hold directly in your name (i.e., shares for which you are the shareholder of record) will not be voted at the Annual Meeting. If you do not return your voting instruction card or vote by Internet or phone, shares that you beneficially own that are held in the name of a brokerage firm or other nominee may be voted in certain circumstances even if you do not provide the brokerage firm with voting instructions. Under New York Stock Exchange (“NYSE”) rules, brokerage firms have the authority to vote shares for which their customers do not provide voting instructions on certain routine matters. The approval of KPMG LLP as the Company’s independent registered public accounting firm for 2011 is considered a routine matter for which brokerage firms may vote uninstructed shares. The election of Directors, the approval of the proposed amendment of the Aetna Inc. 2010 Stock Incentive Plan to increase the number of shares authorized to be issued under the Plan, the approval of the proposed Aetna Inc. 2011 Employee Stock Purchase Plan, the non-binding advisory vote on executive compensation, the non-binding advisory vote on the frequency of the vote on executive compensation, and each of the shareholder proposals to be voted on at the Annual Meeting are not considered routine under the applicable rules, and therefore brokerage firms may not vote uninstructed shares on any of those proposals. Any uninstructed shares you hold through the 401(k) Plan will be voted by the trustee of the 401(k) Plan in the same percentage as the shares held in the 401(k) Plan for which the trustee receives voting instructions.
 
Q:   WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING INSTRUCTION CARD?
 
A: It means your shares are registered differently or are in more than one account. Please provide voting instructions for all of the proxy and voting instruction cards you receive.
 
Q:   WHAT SHOULD I DO IF I WANT TO ATTEND THE ANNUAL MEETING?
 
A: The Annual Meeting will be held at Le Méridien Philadelphia. Directions to Le Méridien Philadelphia in Philadelphia, Pennsylvania are on the page following the attached Notice of Annual Meeting of Shareholders of Aetna Inc. The Annual Meeting is open to all shareholders as of the RECORD DATE (the close of business on March 18, 2011), or their authorized representatives. We ask that you signify your intention to attend by checking the appropriate box on your proxy card or voting instruction card. Instead of issuing an admission ticket, we will place your name on a shareholder attendee list, and you will be asked to register and present government issued photo identification (for example, a driver’s license or passport) before being admitted to the Annual Meeting. If your shares are held in street name and you plan to attend, you must send a written request to attend along with proof that you owned the shares as of the close of business on the RECORD DATE (the close of business on March 18, 2011) (such as a copy of your brokerage or bank account statement for the period including March 18, 2011), to Aetna’s Corporate Secretary at 151 Farmington Avenue, RC61, Hartford, CT 06156.
 
Q:   CAN I LISTEN TO THE ANNUAL MEETING IF I DON’T ATTEND IN PERSON?
 
A: Yes. You can listen to the live audio webcast of the Annual Meeting by going to Aetna’s Internet website at www.aetna.com/investor and then clicking on the link to the webcast.
 
Q:   WHERE CAN I FIND THE VOTING RESULTS OF THE ANNUAL MEETING?
 
A: We will publish the voting results of the Annual Meeting in a Current Report on Form 8-K within four business days after the Annual Meeting.
 
 
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Q:   WHAT CLASS OF SHARES IS ENTITLED TO BE VOTED?
 
A: Each share of Aetna’s Common Stock outstanding as of the RECORD DATE (the close of business on March 18, 2011) is entitled to one vote at the Annual Meeting. At the close of business on March 18, 2011, 380,783,400 shares of the Common Stock were outstanding.
 
Q:   HOW MANY SHARES MUST BE PRESENT TO HOLD THE ANNUAL MEETING?
 
A: A majority of the shares of Common Stock outstanding as of the RECORD DATE (the close of business on March 18, 2011) must be present in person or by proxy for us to hold the Annual Meeting and transact business. This is referred to as a quorum. Broker nonvotes are counted as present for the purpose of determining the presence of a quorum if the broker votes on a non-procedural matter, such as the appointment of the Company’s independent registered public accounting firm. Generally, broker nonvotes occur when shares held by a broker for a beneficial owner are not voted with respect to a particular proposal because the proposal is not a routine matter, and the broker has not received voting instructions from the beneficial owner of the shares. If you vote to abstain on one or more proposals, your shares will be counted as present for purposes of determining the presence of a quorum unless you vote to abstain on all proposals.
 
Q:   WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE PROPOSALS, AND HOW WILL VOTES BE COUNTED?
 
A: Under Pennsylvania corporation law and Aetna’s Articles of Incorporation and By-Laws, the approval of any corporate action taken at the Annual Meeting is based on votes cast. For the proposals that will be considered at the Annual Meeting other than the proposed amendment of the Aetna Inc. 2010 Stock Incentive Plan to increase the number of shares authorized to be issued under the Plan and the proposed Aetna Inc. 2011 Employee Stock Purchase Plan (collectively, the “Plan Proposals”) and the non-binding advisory vote on the frequency of the vote on executive compensation, shareholder approval occurs if the votes cast in favor of the proposal exceed the votes cast against the proposal. “Votes cast” on these proposals means votes “for” or “against” a particular proposal, whether by proxy or in person. Abstentions and broker nonvotes are not considered “votes cast” on these proposals and therefore have no effect on the outcome. In uncontested elections, Directors are elected by a majority of votes cast. As described in more detail on page 10 under “Director Elections — Majority Voting Standard,” Aetna’s Corporate Governance Guidelines require any incumbent Director nominee who receives more “against” than “for” votes to submit his or her resignation for consideration by the Nominating Committee and the Board.
 
The votes necessary to approve the Plan Proposals, including the impact of abstentions and broker nonvotes, are subject to separate NYSE rules. For each of the Plan Proposals, under NYSE rules, shareholder approval occurs if a majority of votes cast are “for” the Proposal and the total number of votes cast are a majority of the shares of Common Stock outstanding at the Record Date. Under NYSE rules, “votes cast” on a Plan Proposal consist of votes “for” or “against” the Plan Proposal as well as abstentions. As a result, abstentions have the effect of a vote “against” a Plan Proposal. Broker nonvotes are not considered “votes cast” and therefore have no effect on the number of votes cast on a Plan Proposal. However, broker nonvotes can have the effect of a vote “against” a Plan Proposal if the broker nonvote causes the total number of votes cast on the Plan Proposal to be less than a majority of the shares of Common Stock outstanding at the Record Date.
 
For the non-binding advisory vote on the frequency of the vote on executive compensation, the choice that receives the majority of the votes cast will be considered approved. Abstentions and broker nonvotes are not considered “votes cast” on this proposal and therefore have no effect on the outcome. Even if no choice receives the required majority vote approval, the Board will take into account all voting results.
 
If you are a beneficial owner and do not provide the shareholder of record with voting instructions, your shares may constitute broker nonvotes, as described under “HOW MANY SHARES MUST BE PRESENT TO HOLD THE ANNUAL MEETING?” above on page 6.
 
 
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Q:   WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE ANNUAL MEETING?
 
A: Aetna will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials, except that you will pay for Internet access if you choose to access these proxy materials over the Internet. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our Directors, officers and employees, none of whom will receive any additional compensation for such solicitation activities. We also have hired Georgeson Inc. to assist us in the solicitation of votes for a fee of $21,000 plus reasonable out-of-pocket expenses for these services, which vary from year to year. We also will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to beneficial owners of Common Stock and obtaining their voting instructions.
 
Q:   DOES AETNA OFFER SHAREHOLDERS THE OPTION OF VIEWING ANNUAL REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS VIA THE INTERNET?
 
A: Yes. Aetna offers shareholders of record the option of viewing future annual reports to shareholders and proxy statements via the Internet instead of receiving paper copies of these documents in the mail. The 2011 Aetna Inc. Notice of Annual Meeting and Proxy Statement and 2010 Aetna Annual Report, Financial Report to Shareholders are available on Aetna’s Internet website at www.aetna.com/proxymaterials. Under Pennsylvania law, Aetna may provide shareholders who give Aetna their e-mail addresses with electronic notice of its shareholder meetings as described below.
 
If you are a shareholder of record, you can choose to receive annual reports to shareholders and proxy statements via the Internet and save Aetna the cost of producing and mailing these documents in the future by following the instructions under “HOW DO I ELECT THIS OPTION?” below. If you hold your shares through a stockbroker, bank or other holder of record, check the information provided by that entity for instructions on how to elect to view future notices of shareholder meetings, proxy statements and annual reports over the Internet.
 
If you are a shareholder of record and choose to receive future notices of shareholder meetings by e-mail and view future annual reports and proxy statements over the Internet, you must supply an e-mail address, and you will receive your notice of the meeting by e-mail when those materials are posted. The notice you receive will include instructions and contain the Internet address for those materials.
 
Many shareholders who hold their shares through a stockbroker, bank or other holder of record and elect electronic access will receive an e-mail containing the Internet address to access Aetna’s notices of shareholder meetings, proxy statements and annual reports when those materials are posted.
 
Q:   HOW DO I ELECT THIS OPTION?
 
A: If you are a shareholder of record and are interested in receiving future notices of shareholder meetings by e-mail and viewing future annual reports and proxy statements on the Internet instead of receiving paper copies of these documents, you may elect this option when voting by using the Internet at www.proxyvote.com and following the instructions. You will need to have your proxy card (or the e-mail message you receive with instructions on how to vote) in hand when you access the website.
 
Q:   WHAT IF I GET MORE THAN ONE COPY OF AETNA’S ANNUAL REPORT?
 
A: The 2010 Aetna Annual Report, Financial Report to Shareholders is being mailed to shareholders in advance of or together with this Proxy Statement. If you hold Aetna shares in your own name and received more than one copy of the 2010 Aetna Annual Report, Financial Report to Shareholders at your address and wish to reduce the number of reports you receive and save Aetna the cost of producing and mailing these reports, you should contact Aetna’s Transfer Agent at 1-800-446-2617 to discontinue the mailing of reports on the accounts you select. At least one account at your address must continue to receive an annual report,
 
 
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unless you elect to review future annual reports over the Internet. Mailing of dividend checks, dividend reinvestment statements, proxy materials and special notices will not be affected by your election to discontinue duplicate mailings of annual reports. Registered shareholders may resume the mailing of an annual report to an account by calling Aetna’s Transfer Agent at 1-800-446-2617. If you own shares through a stockbroker, bank or other holder of record and received more than one 2010 Aetna Annual Report, Financial Report to Shareholders, please contact the holder of record to eliminate duplicate mailings.
 
“Householding” occurs when a single copy of our annual report and proxy statement is sent to any household at which two or more shareholders reside if they appear to be members of the same family. Although we do not “household” for registered shareholders, a number of brokerage firms have instituted householding for shares held in street name. This procedure reduces our printing and mailing costs and fees. Shareholders who participate in householding will continue to receive separate proxy cards, and householding will not affect the mailing of account statements or special notices in any way.
 
Q:   WHAT IF A DIRECTOR NOMINEE IS UNWILLING OR UNABLE TO SERVE?
 
A: If for any unforeseen reason one or more of Aetna’s nominees is not available to be a candidate for Director, the persons named as proxy holders on your proxy card may vote your shares for such other candidate or candidates as may be nominated by the Board, or the Board may reduce the number of Directors to be elected.
 
Q:   WHAT HAPPENS IF ADDITIONAL PROPOSALS ARE PRESENTED AT THE MEETING?
 
A: Other than the election of Directors and the other proposals described in this Proxy Statement, Aetna has not received proper notice of, and is not aware of, any matters to be presented for a vote at the Annual Meeting. If you grant a proxy using the enclosed proxy card, the persons named as proxies on the enclosed proxy card, or any of them, will have discretion to, and intend to, vote your shares according to their best judgment on any additional proposals or other matters properly presented for a vote at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place.
 
Q:   CAN I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR’S ANNUAL MEETING OF SHAREHOLDERS OR NOMINATE INDIVIDUALS TO SERVE AS DIRECTORS?
 
A: Yes. You can submit proposals for consideration at future annual meetings, including Director nominations.
 
  •  SHAREHOLDER PROPOSALS: In order for a shareholder proposal to be considered for inclusion in Aetna’s proxy statement for the 2012 Annual Meeting, the written proposal must be RECEIVED by Aetna’s Corporate Secretary no later than the close of business on December 14, 2011. SUCH PROPOSALS MUST BE SENT TO: CORPORATE SECRETARY, AETNA INC., 151 FARMINGTON AVENUE, RC61, HARTFORD, CT 06156. Such proposals also will need to comply with the United States Securities and Exchange Commission (the “SEC”) rules and regulations, namely Rule 14a-8, regarding the inclusion of shareholder proposals in Aetna sponsored proxy materials.
 
     In order for a shareholder proposal to be raised from the floor during the 2012 Annual Meeting instead of being submitted for inclusion in Aetna’s proxy statement, the shareholder’s written notice must be RECEIVED by Aetna’s Corporate Secretary at least 90 calendar days before the date of the 2012 Annual Meeting and must contain the information required by Aetna’s By-Laws. Please note that the 90-day advance notice requirement relates only to matters a shareholder wishes to bring before the 2012 Annual Meeting from the floor. It does not apply to proposals a shareholder wishes to have included in Aetna’s proxy statement; that procedure is explained in the paragraph above.
 
 
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  •  NOMINATION OF DIRECTOR CANDIDATES: You may propose Director candidates for consideration by the Nominating Committee. In addition, Aetna’s By-Laws permit shareholders to nominate Directors for consideration at a meeting of shareholders at which one or more Directors are to be elected. In order to nominate a Director candidate at the 2012 Annual Meeting, the shareholder’s written notice must be RECEIVED by Aetna’s Corporate Secretary at least 90 calendar days before the date of the 2012 Annual Meeting and must contain the information required by Aetna’s By-Laws. (Please see “Director Qualifications” on page 19 for a description of qualifications that the Board believes are required for Board nominees.)
 
  •  COPY OF BY-LAW PROVISIONS: You may contact the Corporate Secretary at Aetna’s Headquarters, 151 Farmington Avenue, RC61, Hartford, CT 06156, for a copy of the relevant provisions of Aetna’s By-Laws regarding the requirements for making shareholder proposals and nominating Director candidates. You also can visit Aetna’s website at www.aetna.com/governance to review and download a copy of Aetna’s By-Laws.
 
Q:   CAN SHAREHOLDERS ASK QUESTIONS AT THE ANNUAL MEETING?
 
A: Yes. You can ask questions regarding each of the items to be voted on when those items are discussed at the Annual Meeting. Shareholders also will have an opportunity to ask questions of general interest at the end of the Annual Meeting.
 
Q:   WHO COUNTS THE VOTES CAST AT THE ANNUAL MEETING?
 
A: Votes are counted by employees of Broadridge Financial Solutions, Inc. and certified by the judge of election for the Annual Meeting who is an employee of IOE Services Inc. The judge will determine the number of shares outstanding and the voting power of each share, determine the shares represented at the Annual Meeting, determine the existence of a quorum, determine the validity of proxies and ballots, count all votes and determine the results of the actions taken at the Annual Meeting.
 
Q:   IS MY VOTE CONFIDENTIAL?
 
A: Yes. The vote of each shareholder is held in confidence from Aetna’s Directors, officers and employees except (a) as necessary to meet applicable legal requirements (including stock exchange listing requirements) and to assert or defend claims for or against Aetna and/or one or more of its consolidated subsidiaries, (b) as necessary to assist in resolving any dispute about the authenticity or accuracy of a proxy card, consent, ballot, authorization or vote, (c) if there is a contested proxy solicitation, (d) if a shareholder makes a written comment on a proxy card or other means of voting or otherwise communicates the shareholder’s vote to management, or (e) as necessary to obtain a quorum.
 
 
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GOVERNANCE OF THE COMPANY
 
At Aetna, we believe sound corporate governance principles are good for our business, the industry, the competitive marketplace and for all of those who place their trust in us. We have embraced the principles behind the Sarbanes-Oxley Act of 2002, as well as the governance rules for companies listed on the NYSE. These principles are reflected in the structure and composition of our Board and in the charters of our Board Committees, and are reinforced through Aetna’s Code of Conduct, which applies to every Aetna employee and every member of the Board.
 
Aetna’s Corporate Governance Guidelines
 
Aetna’s Corporate Governance Guidelines (the “Guidelines”) provide the framework for the governance of Aetna. The governance rules for companies listed on the NYSE and those contained in the Sarbanes-Oxley Act of 2002 are reflected in the Guidelines. The Guidelines address the role of the Board (including advising on key strategic, financial and business objectives); the composition and selection of Directors; the functioning of the Board (including its annual self-evaluation); the Committees of the Board; the compensation of Directors; and the conduct and ethics standards for Directors, including a prohibition against any nonmanagement Director having a direct or indirect material relationship with the Company except as authorized by the Board or our Nominating Committee, and a prohibition against Company loans to, or guarantees of obligations of, Directors and their family members. The Guidelines are available at www.aetna.com/governance.
 
The Board reviews the Company’s corporate governance practices annually. These reviews include a comparison of our current practices to those suggested by various groups or authorities active in corporate governance and to those of other public companies.
 
Aetna’s Board of Directors
 
Aetna’s business and affairs are managed under the direction of the Board. Under Aetna’s By-Laws, the size of the Board may range from 3 to 21 members, with any change to the size of the Board to be designated from time to time by the Board. The Board currently consists of 13 individuals. The Board appoints Aetna’s officers, who serve at the discretion of the Board.
 
Under the Articles of Incorporation, at each annual meeting of shareholders, all of the Directors are elected to hold office for a term of one year and until their successors are elected and qualified.
 
Director Elections — Majority Voting Standard
 
Aetna’s Articles of Incorporation provide for majority voting in uncontested elections of Directors. Under the Articles of Incorporation, a Director nominee will be elected if the number of votes cast “for” the nominee exceeds the number of votes cast “against” the nominee. An “abstain” vote will not have any effect on the outcome of the election. In contested elections, those in which there are more candidates for election than the number of Directors to be elected and one or more candidates have been properly proposed by shareholders, the voting standard will be a plurality of votes cast. Under Pennsylvania law and the Articles of Incorporation, if an incumbent Director nominee does not receive a majority of the votes cast in an uncontested election, the incumbent Director will continue to serve on the Board until his or her successor is elected and qualified. To address this situation, the Guidelines require any incumbent nominee for Director in an uncontested election who receives more “against” votes than “for” votes to promptly submit his or her resignation for consideration by the Nominating Committee. The Nominating Committee is then required to recommend to the Board the action to be taken with respect to the resignation, and the Board is required to act on the resignation, in each case within a reasonable period of time. Aetna will disclose promptly to the public each such resignation and decision by the Board. New nominees not already serving on the Board who fail to receive a majority of votes cast in an uncontested election will not be elected to the Board in the first instance.
 
 
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Director Retirement Age
 
The Nominating Committee regularly assesses the appropriate size and composition of the Board and, among other matters, whether any vacancies on the Board are expected due to retirement or otherwise. The current Director retirement age is 76. In accordance with the Guidelines, Earl G. Graves is not standing for re-election at the Annual Meeting. Mr. Graves’ vacancy will not be filled at the Annual Meeting, and, as a result, the size of the Board will be reduced from 13 to 12 Directors.
 
Executive Sessions
 
Aetna’s independent Directors met five times in executive session during 2010 without management present. Aetna’s nonmanagement Directors meet in regularly scheduled executive sessions at every regular Aetna Board meeting, without management present. During 2010, the nonmanagement Directors, each of whom other than Dr. Coye is independent, met eight times to discuss certain Board policies, processes and practices, the performance and proposed performance-based compensation of the Chief Executive Officer (“CEO”), management succession and other matters relating to the Company and the functioning of the Board. Dr. Coye was an independent Director until September 2010, when she joined UCLA Health System.
 
Board Leadership Structure and the Presiding Director
 
The Board, assisted by the Nominating Committee, regularly reviews the leadership structure of the Company, including whether the position of Chairman should be held by an independent Director. The Board believes that the decision to combine or separate the positions of Chairman and Chief Executive Officer is highly dependent on the strengths and personalities of the personnel involved and must take into account current business conditions and the environment in which the Company operates. The Board also strongly believes Mr. Bertolini, who continues to serve as Chief Executive Officer and President, will serve as a successful leader of the Board and an effective bridge between the Directors and Company management. While the Board has decided to keep the roles of Chairman and Chief Executive Officer combined at this time, the Board also has taken steps to ensure that it effectively carries out its responsibility for independent oversight of management. These steps include the appointment of a Presiding Director (with comprehensive and clearly delineated duties); the scheduling at every regular Board meeting of an executive session of the nonmanagement Directors (without Mr. Bertolini or other management attendees present); and assuring that substantially all of the nonmanagement Directors are independent. In addition, each Board Committee meets regularly in executive session without management attendees.
 
Gerald Greenwald, an independent Director, has been the Presiding Director since April 2007. The Presiding Director is appointed annually. Generally, the Presiding Director is responsible for coordinating the activities of the independent Directors. Among other things, the Presiding Director sets the agenda for and leads the nonmanagement and independent Director sessions that the Board regularly holds, and briefs the Chairman on any issues arising from those sessions. The Presiding Director also acts as the principal liaison to the Chairman for the views of, and any concerns or issues raised by, the independent Directors, though all Directors continue to interact one-on-one with the Chairman as needed and as appropriate. The Chairman consults with the Presiding Director, who provides input on and approves agendas for Board meetings and Board meeting schedules. The Presiding Director also consults with the other Directors and advises the Chairman about the quality, quantity and timeliness of information provided to the Board and the Board’s decision making processes. The Board has agreed that Edward J. Ludwig, an independent Director, will become the Presiding Director on September 23, 2011.
 
Communications with the Board
 
To contact Aetna’s management Director, Mark T. Bertolini, Chairman, Chief Executive Officer and President, you may write to him at Aetna Inc., 151 Farmington Avenue, Hartford, CT 06156. Communications sent to Aetna’s management Director will be delivered directly to him. Anyone wishing to make their concerns known to Aetna’s nonmanagement Directors, the Presiding Director or
 
 
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to send a communication to the entire Board may contact Mr. Greenwald by writing to the Presiding Director at P.O. Box 370205, West Hartford, CT 06137-0205. All such communications will be kept confidential and forwarded directly to the Presiding Director or the Board, as applicable. Items that are unrelated to a Director’s duties and responsibilities as a Board member, such as junk mail, may be excluded by the Corporate Secretary.
 
Director Independence
 
The Board has established guidelines (“Director Independence Standards”) to assist it in determining Director independence. In accordance with the Director Independence Standards, the Board must determine that each independent Director has no material relationship with the Company other than as a Director and/or a shareholder of the Company. Consistent with the NYSE listing standards, the Director Independence Standards specify the criteria by which the independence of our Directors will be determined, including guidelines for Directors and their immediate family members with respect to past employment or affiliation with the Company or its external auditor. A copy of the Director Independence Standards is attached to this Proxy Statement as Annex A and also is available at www.aetna.com/governance.
 
Pursuant to the Director Independence Standards, the Board undertook its annual review of Director independence in February 2011. The purpose of this review was to determine whether any nonmanagement Director’s relationships or transactions are inconsistent with a determination that the Director is independent. During this review, the Board considered transactions and relationships between each Director or any member of his or her immediate family (or any entity of which a Director or an immediate family member is a partner, major shareholder or officer) and the Company. The Board also considered whether there were any transactions or relationships between Directors or any member of their immediate family with members of the Company’s senior management or their affiliates.
 
As a result of this review, the Board affirmatively determined in its business judgment that each of Frank M. Clark, Betsy Z. Cohen, Roger N. Farah, Barbara Hackman Franklin, Jeffrey E. Garten, Gerald Greenwald, Ellen M. Hancock, Richard J. Harrington, Edward J. Ludwig and Joseph P. Newhouse, each of whom also is standing for election at the Annual Meeting, and Earl G. Graves, who is not standing for re-election at the Annual Meeting, is independent as defined in the NYSE listing standards and under Aetna’s Director Independence Standards and that any relationship with the Company (either directly or as a partner, major shareholder or officer of any organization that has a relationship with the Company) is not material under the independence thresholds contained in the NYSE listing standards and under Aetna’s Director Independence Standards. The Board has determined that Molly J. Coye, M.D., is not independent under the NYSE listing standards and under Aetna’s Director Independence Standards due to the Company’s business relationship with her employer. Dr. Coye is not involved in that relationship.
 
In determining that each of the nonmanagement Directors other than Dr. Coye is independent, the Board considered that the Company in the ordinary course of business sells products and services to, and/or purchases products and services from, companies and other entities at which some of our Directors or their immediate family members are or have been officers and/or significant equity holders or have certain other relationships. Specifically, the Board considered the existence of and approved the transactions listed in the tables on page 13, all of which were made in the ordinary course of business, on terms and conditions substantially similar to those with unrelated third parties, and which the Board believes were in, or not inconsistent with, the best interests of the Company. The aggregate amounts paid to or received from these companies or other entities in each of the last three years did not approach the threshold in the Director Independence Standards (i.e., the greater of $1 million or 2% of the other company’s consolidated gross revenues), except in the case of Dr. Coye for 2010. The tables below set forth such aggregate amounts for 2010.
 
 
 
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                Type of
   
                Transaction,
   
        Type of
  Relationship to
  Relationship or
  2010
Director   Organization   Organization   Organization   Agreement(a)   Amount(b)
 
    2010 Sales and Other Amounts Received by the Company
 
 
Frank M. Clark
  Exelon Corporation   Energy Services Company   Executive Officer   Health Care Benefits (Medical/Dental)   »0.02%
>$1 million
 
 
Edward E. Cohen, husband of Betsy Z. Cohen
  Board of Brandywine Construction & Management, Inc.   Property Management Company   Executive Officer (Chairman)   Health Care Benefits (Medical)   <2%
<$500,000
 
 
Roger N. Farah
  Polo Ralph Lauren Corporation   Lifestyle Products   Executive Officer   Health Care Benefits (Medical/Dental)   <1%
>$500,000
 
 
Jeffrey E. Garten
  Yale University   Educational Institution   Employee   Health Care Benefits (Medical/Life)   »0.11%
>$1 million
 
 
Earl G. Graves
  Earl G. Graves, Ltd.   Multimedia
Company
  Executive Officer   Health Care Benefits (Medical/Dental)   >2%
<$1 million
 
 
Gerald Greenwald
  Electro-Motive Diesel, Inc.   Builder Of Diesel- Electric Locomotives   Non-Executive Chairman   Health Care Benefits (Medical/Dental)   <1%
<$500,000
 
 
Edward J. Ludwig
  Becton, Dickinson and Company   Global Medical Technology Company   Executive Officer   Health Care Benefits (Medical/Dental); Manufacturer Discounts   »0.07%
>$1 million
 
 
 
(a) All premiums and fees were determined on the same terms and conditions as premiums and fees for our other customers.
 
(b) Percentages are determined by dividing (1) calendar year 2010 payments due and owing to the Company by (2) the applicable entity’s most recently available annual consolidated gross revenues.
 
                     
 
                Type of,
   
                Transaction,
   
        Type of
  Relationship to
  Relationship or
  2010
Director   Organization   Organization   Organization   Agreement(A)   Amount(B)
 
    2010 Purchases by the Company
 
 
Frank M. Clark
  Exelon Corporation, and/or its subsidiary companies   Energy Services Company   Executive Officer   Utility Services; Rent for Parking Easement   »0.008%
>$1 million
 
 
Molly J. Coye, M.D. 
  UCLA Health System   Provider of Hospital/Physician Services   Chief Innovation Officer   Contract with Provider for Hospital/Physician Services for Members(C)   »2.65%
>$1 million
 
 
Jeffrey E. Garten
  Yale University   Educational Institution   Employee   Employee Tuition; Health Conference Sponsorship   <1%
<$500,000
 
 
Earl G. Graves
  Earl G. Graves, Ltd., and/or its subsidiary companies   Multimedia Company   Executive Officer   Advertising Placed by Third Party Agency; Event Sponsorship   <2%
<$500,000
 
 
Joseph P. Newhouse
  Harvard University   Educational Institution   Employee   Medical Content for InteliHealth/Active Health; Event Sponsorship   <1%
<$1 million
 
 
 
(A) None of the transactions or relationships included consulting services provided to the Company.
 
(B) Percentages are determined by dividing (1) calendar year 2010 purchases by the Company by (2) the applicable entity’s most recently available annual consolidated gross revenues.
 
(C) Dr. Coye is Chief Innovation Officer at UCLA Health System, which includes health institutions and providers. These providers are part of the Company’s broad national network of hospitals and physicians and other care providers. Dr. Coye has no interest in or involvement with UCLA Health System’s relationship with the Company.
 
 
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In addition to the transactions in the table listed on page 13, the Company may also hold equity and/or debt securities as investments in the ordinary course in corporations or organizations with which Messrs. Clark and/or Farah are affiliated. The amount of each such holding is below the 5% threshold amount in the Director Independence Standards. The Board determined that none of these investment relationships was material or impaired the independence of any Director.
 
All members of the Audit Committee, the Committee on Compensation and Organization (the “Compensation Committee”) and the Nominating Committee are, in the business judgment of the Board, independent Directors as defined in the NYSE listing standards and in Aetna’s Director Independence Standards.
 
Compensation Committee Interlocks and Insider Participation
 
The members of the Compensation Committee are Betsy Z. Cohen (Chairman), Frank M. Clark, Roger N. Farah, Barbara Hackman Franklin and Jeffrey E. Garten. None of the members of the Compensation Committee has ever been an officer or employee of the Company. There are no interlocking relationships between any of our executive officers or Compensation Committee members.
 
Meeting Attendance
 
The Board and its Committees meet throughout the year on a set schedule, and also hold special meetings from time to time, as appropriate. During 2010, the Board met fourteen times. The average attendance of Directors at all meetings during the year was 92.6%, and no Director attended less than 75% of the aggregate number of Board and Committee meetings that he or she was eligible to attend. It is the policy of the Board that all Directors should be present at Aetna’s Annual Meeting of Shareholders. Twelve of the thirteen Directors then in office and standing for election attended Aetna’s 2010 Annual Meeting of Shareholders.
 
Aetna’s Code of Conduct
 
Aetna’s Code of Conduct applies to every Aetna employee and to every member of the Board, and can be accessed at www.aetna.com/governance. The Code of Conduct is designed to ensure that Aetna’s business is conducted in a consistently legal and ethical manner. The Code of Conduct includes policies on employee conduct, conflicts of interest and the protection of confidential information, and requires compliance with all applicable laws and regulations. Aetna will disclose any amendments to the Code of Conduct, or waivers of the Code of Conduct relating to Aetna’s Directors, executive officers and principal financial and accounting officers or persons performing similar functions, on its website at www.aetna.com/governance within four business days following the date of any such amendment or waiver. To date, no waivers have been requested or granted.
 
Related Party Transaction Policy
 
Under Aetna’s Code of Conduct, the Board or an independent Committee reviews any potential conflicts between the Company and any Director. In addition, the Board has adopted a written Related Party Transaction Policy (the “Policy”) which applies to Directors, executive officers, significant shareholders and their immediate family members (each a “Related Person”). Under the Policy, all transactions involving the Company in which a Related Person has a direct or indirect material interest must be reviewed and approved (1) by the Board or the Nominating Committee if involving a Director, (2) by the Board or the Audit Committee if involving an executive officer, or (3) by the Board if involving a significant shareholder. The Board or appropriate Committee considers relevant facts and circumstances, which may include, without limitation, the commercial reasonableness of the terms, the benefit to the Company, opportunity costs of alternate transactions, the materiality and character of the Related Person’s direct or indirect interest, and the actual or apparent conflict of interest of the Related Person. A transaction may be approved if it is determined, in the Board’s or appropriate Committee’s reasonable business judgment, that the transaction is in, or not inconsistent with, the best interests of the Company and its shareholders, and considering the
 
 
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interests of other relevant constituents, when deemed appropriate. Determinations of materiality are made by the Board or appropriate Committee, as applicable.
 
Board’s Role in the Oversight of Risk
 
The Company relies on its comprehensive enterprise risk management (“ERM”) process to aggregate, monitor, measure and manage risk. The ERM process is dynamic and ongoing. It is designed to identify the most important risks facing the Company as well as to prioritize those risks in the context of the Company’s overall strategy. The Company’s ERM team is led by the Company’s Chief Enterprise Risk Officer, who is also the Company’s Chief Financial Officer. In collaboration with the Audit Committee and the Board, the ERM team annually conducts a risk assessment of the Company’s businesses. All of our key business leaders are involved in the risk assessment process. The risk assessment is presented to, and reviewed by, the Audit Committee and, after reflecting the Audit Committee’s views, the list of enterprise risks is then reviewed and approved by the Board. As part of their reviews, the Audit Committee and the Board consider the internal governance structure for managing risks, and the Board assigns responsibility for ongoing oversight of each identified risk to a specific Committee of the Board or to the Board. Discussions of assigned risks are then incorporated into the agenda for each Committee (or the Board) throughout the year. Risk management is ongoing, and the importance assigned to identified risks can change and new risks can emerge during the year as the Company develops and implements its strategy. Consequently, our Chief Enterprise Risk Officer, in consultation with the Chairman and Chief Executive Officer, monitors risk management and mitigation activities across the organization throughout the year and reports regularly to the Audit Committee and the Board concerning the Company’s risk management profile and activities. As a result, we believe having the same individual serve as both Chairman and Chief Executive Officer assists the Board in performing its risk oversight function because the CEO is directly involved in the Company’s ERM process. The Audit Committee also meets regularly in private sessions with the Company’s Chief Enterprise Risk Officer.
 
Board and Committee Membership; Committee Descriptions
 
Aetna’s Board oversees and guides the Company’s management and its business. Committees support the role of the Board on issues that are better addressed by smaller, more focused subsets of Directors.
 
 
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The following table presents, as of April 11, 2011, the key standing Committees of the Board, the membership of such Committees and the number of times each such Committee met in 2010. Board Committee Charters adopted by the Board for each of the six Committees listed below are available at www.aetna.com/governance.
 
                                                 
 
    Board Committee
                        Nominating
        Compensation
      Investment
      and
        and
      and
  Medical
  Corporate
Nominee/Director   Audit   Organization   Executive   Finance   Affairs   Governance
 
 
Mark T. Bertolini
                    X *     X                  
Frank M. Clark
            X                       X          
Betsy Z. Cohen
            X *     X       X                  
Molly J. Coye, M.D. 
                            X       X          
Roger N. Farah
            X               X                  
Barbara Hackman Franklin
            X       X                       X  
Jeffrey E. Garten
            X                       X          
Earl G. Graves
    X               X                       X  
Gerald Greenwald
                    X       X *             X  
Ellen M. Hancock
    X                                       X *
Richard J. Harrington
    X *                     X                  
Edward J. Ludwig
    X               X                       X  
Joseph P. Newhouse
    X               X               X *        
 
 
Number of Meetings in 2010
    9       12       0       5       6       7  
 
 
 
* Committee Chairman.
 
Planned Committee Changes for 2011
 
The Board has determined that:
 
•  Effective May 19, 2011, Molly J. Coye, M.D., will become the Chairman of the Medical Affairs Committee;
 
•  Effective July 28, 2011, Edward J. Ludwig will become the Chairman of the Investment and Finance Committee; and
 
•  Effective May 20, 2011, the Executive Committee will consist of the Presiding Director, the Chairman of each Committee then in office and Mr. Bertolini.
 
Committee Functions and Responsibilities
 
The functions and responsibilities of the key standing Committees of Aetna’s Board are described below.
 
•  Audit Committee. The Board has determined in its business judgment that all members of the Audit Committee meet the independence, financial literacy and expertise requirements for audit committee members set forth in the NYSE listing standards. Additionally, the Board has determined in its business judgment that each Audit Committee member, based on his or her background and experience (including that described in this Proxy Statement), has the requisite attributes of an “audit committee financial expert” as defined by the SEC. The Audit Committee assists the Board in its oversight of (1) the integrity of the financial statements of the Company, (2) the qualifications and independence of the Company’s independent registered public accounting firm (the “Independent Accountants”), (3) the performance of the Company’s internal audit function and the Independent Accountants, and (4) compliance by the Company with legal and regulatory requirements. The Audit Committee periodically discusses management’s policies with respect to risk assessment and risk management, and periodically discusses with the Independent Accountants, management and Internal Audit department significant financial risk exposures and the steps management has taken to monitor, control and report such exposures. The Audit Committee is directly
 
 
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responsible for the appointment, compensation, retention and oversight of the work of the Independent Accountants and any other accounting firm engaged to perform audit, review or attest services (including the resolution of any disagreements between management and any auditor regarding financial reporting). The Independent Accountants and any other such accounting firm report directly to the Audit Committee. The Company’s Chief Compliance Officer is authorized to communicate promptly and personally to the Audit Committee on all matters he or she deems appropriate, including without limitation any matter involving criminal conduct or potential criminal conduct. The Audit Committee is empowered, to the extent it deems necessary or appropriate, to retain outside legal, accounting or other advisers having special competence as necessary to assist it in fulfilling its responsibilities and duties. The Audit Committee has available from the Company such funding as the Audit Committee determines for compensation to the Independent Accountants and any other accounting firm or other advisers engaged by the Audit Committee, and for the Audit Committee’s ordinary administrative expenses. The Audit Committee conducts an annual evaluation of its performance. For more information regarding the role, responsibilities and limitations of the Audit Committee, please refer to the Report of the Audit Committee beginning on page 78.
 
   The Audit Committee can be confidentially contacted by employees and others wishing to raise concerns or complaints about the Company’s accounting, internal accounting controls or auditing matters by calling AlertLine®, an independent toll-free service, at 1-888-891-8910 (available seven days a week, 24 hours a day), or by writing to: Aetna Inc. Audit Committee, c/o Corporate Compliance, P.O. Box 370205, West Hartford, CT 06137-0205.
 
•  Committee on Compensation and Organization. The Board has determined in its business judgment that all members of the Compensation Committee meet the independence requirements set forth in the NYSE listing standards and in Aetna’s Director Independence Standards. The Compensation Committee is directly responsible for reviewing and approving the corporate goals and objectives relevant to Chief Executive Officer and other executive officer compensation; evaluating the Chief Executive Officer’s and other executive officers’ performance in light of those goals and objectives; and establishing the Chief Executive Officer’s and other executive officers’ compensation levels based on this evaluation. The Chief Executive Officer’s compensation is determined after reviewing the Chief Executive Officer’s performance and consulting with the nonmanagement Directors of the Board. The Compensation Committee also evaluates and determines the compensation of the Company’s executive officers and oversees the compensation and benefit plans, policies and programs of the Company. The Compensation Committee consults with the Chief Executive Officer regarding the compensation of all executive officers other than the Chief Executive Officer, but the Compensation Committee does not delegate its authority with regard to these executive compensation decisions. The Compensation Committee also administers Aetna’s stock-based incentive plans and Aetna’s 2001 Annual Incentive Plan. The Compensation Committee reviews and makes recommendations, as appropriate, to the Board as to the development and succession plans for the senior management of the Company. The Compensation Committee conducts an annual evaluation of its performance.
 
   The Compensation Committee has the authority to retain counsel and other experts or consultants as it may deem appropriate. The Compensation Committee has the sole authority to select, retain and terminate any consultant used to assist the Compensation Committee and has the sole authority to approve each consultant’s fees and other retention terms. In accordance with this authority, the Compensation Committee engages Frederic W. Cook & Co., Inc. (“Cook”) as an independent outside compensation consultant to advise the Compensation Committee on all matters related to Chief Executive Officer and other executive compensation. The Company may not engage Cook for any services other than in support of the Compensation Committee without the prior approval of the Chairman of the Compensation Committee. Cook also advises the Nominating Committee regarding Director compensation. The Company does not engage Cook for any services other than in support of these Committees. A representative of Cook attended eight of the Compensation Committee’s meetings in 2010.
 
•  Executive Committee. This Committee is authorized to act on behalf of the Board between regularly scheduled Board meetings, usually when timing is critical. The Executive Committee has the authority to retain counsel and other experts or consultants as it may deem appropriate.
 
 
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•  Investment and Finance Committee. This Committee assists the Board in reviewing the Company’s investment policies, strategies, transactions and performance and in overseeing the Company’s capital and financial resources. The Investment and Finance Committee has the authority to retain counsel and other experts or consultants as it may deem appropriate. The Investment and Finance Committee conducts an annual evaluation of its performance.
 
•  Medical Affairs Committee. This Committee provides general oversight of Company policies and practices that relate to providing the Company’s members with access to cost-effective, quality health care. The Medical Affairs Committee has the authority to retain counsel and other experts or consultants as it may deem appropriate. The Medical Affairs Committee conducts an annual evaluation of its performance.
 
•  Nominating and Corporate Governance Committee. The Board has determined in its business judgment that all members of the Nominating Committee meet the independence requirements set forth in the NYSE listing standards and in Aetna’s Director Independence Standards. The Nominating Committee assists the Board in identifying individuals qualified to become Board members, consistent with criteria approved by the Board; oversees the organization of the Board to discharge the Board’s duties and responsibilities properly and efficiently; and identifies best practices and recommends to the Board corporate governance principles. Other specific duties and responsibilities of the Nominating Committee include: annually assessing the size and composition of the Board; annually reviewing and recommending Directors for continued service; reviewing the compensation of, and benefits for, Directors; recommending the retirement policy for Directors; coordinating and assisting the Board in recruiting new members to the Board; reviewing potential conflicts of interest or other issues arising out of other positions held or proposed to be held by, or any changes in circumstances of, a Director; recommending Board Committee assignments; overseeing the annual evaluation of the Board; conducting an annual performance evaluation of the Nominating Committee; conducting a preliminary review of Director independence and the financial literacy and expertise of Audit Committee members; and interpreting, as well as reviewing any proposed waiver of, Aetna’s Code of Conduct, the code of business conduct and ethics applicable to Directors. The Nominating Committee has the authority to retain counsel and other experts or consultants as it may deem appropriate. The Nominating Committee has the sole authority to select, retain and terminate any search firm used to identify Director candidates and has the sole authority to approve the search firm’s fees and other retention terms.
 
   The Board makes all Director compensation determinations after considering the recommendations of the Nominating Committee. In setting Director compensation, both the Nominating Committee and the Board review director compensation data obtained from Cook. Cook advises the Nominating Committee regarding Director compensation, but neither the Nominating Committee nor the Board delegates any Director compensation decision making authority.
 
Consideration of Director Nominees
 
•  Shareholder Nominees. The Nominating Committee will consider properly submitted shareholder nominations for candidates for membership on the Board as described on page 19 under “Director Qualifications” and “Identifying and Evaluating Nominees for Director.” Any shareholder nominations of candidates proposed for consideration by the Nominating Committee should include the nominee’s name and qualifications for Board membership, and otherwise comply with applicable rules and regulations, and should be addressed to:
 
Corporate Secretary
Aetna Inc.
151 Farmington Avenue, RC61
Hartford, CT 06156
 
 
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In addition, Aetna’s By-Laws permit shareholders to nominate Directors for consideration at a meeting of shareholders at which one or more Directors are to be elected. For a description of the process for nominating Directors in accordance with Aetna’s By-Laws, see “CAN I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR’S ANNUAL MEETING OF SHAREHOLDERS OR NOMINATE INDIVIDUALS TO SERVE AS DIRECTORS?” beginning on page 8.
 
•  Director Qualifications. The Nominating Committee Charter sets out the criteria weighed by the Nominating Committee in considering all Director candidates, including shareholder-identified candidates. The criteria are re-evaluated periodically and currently include: the relevance of the candidate’s experience to the business of the Company; enhancing the diversity of the Board; the candidate’s independence from conflict or direct economic relationship with the Company; and the candidate’s ability to attend Board meetings regularly and devote an appropriate amount of effort in preparation for those meetings. It also is expected that nonmanagement Directors nominated by the Board are individuals who possess a reputation and hold positions or affiliations befitting a director of a large publicly held company, and are actively engaged in their occupations or professions or are otherwise regularly involved in the business, professional or academic community.
 
•  Diversity. The Nominating Committee believes that, in addition to the traditional concepts of diversity (e.g., gender, race and ethnicity), it also is important to achieve a diversity of knowledge, experience and capabilities on the Board that supports the Company’s strategic direction. The Nominating Committee and the Board believe that having a Board of Directors with a broad background of skills, perspectives and experiences is crucial to enhancing the quality of Board decision making and governance. As a result, identifying Director candidates with diverse experiences, qualifications and skills that complement those already present on the Board has been and will continue to be central to the Nominating Committee’s Director nomination process. Although the Board does not have a formal diversity policy, our Directors come from many different fields, including, academia, technology, manufacturing, retail, service, not-for-profit and regulatory. Our Director Nominees for 2011 include four women and one African American.
 
   The specific experiences, qualifications, attributes and skills that the Nominating Committee and the Board believe each Nominee possesses are set forth below each Nominee’s biography beginning on page 20.
 
•  Identifying and Evaluating Nominees for Director. The Nominating Committee uses a variety of methods for identifying and evaluating nominees for Director. In recommending Director nominees to the Board, the Nominating Committee solicits candidate recommendations from its own members, other Directors and management. It also may engage the services and pay the fees of a professional search firm to assist it in identifying potential Director nominees. The Nominating Committee also reviews materials provided by professional search firms or other parties in connection with its consideration of nominees. The Nominating Committee regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. If vacancies are anticipated, or otherwise arise, the Nominating Committee considers whether to fill those vacancies and, if applicable, considers various potential Director candidates. These candidates are evaluated against the current Director criteria at regular or special meetings of the Nominating Committee and may be considered at any point during the year. As described above, the Nominating Committee will consider properly submitted shareholder nominations for candidates for the Board. Following verification of the shareholder status of the person(s) proposing a candidate, a shareholder nominee will be considered by the Nominating Committee at a meeting of the Nominating Committee. If any materials are provided by a shareholder in connection with the nomination of a Director candidate, such materials are forwarded to the Nominating Committee.
 
   The Board and the Nominating Committee each assessed the characteristics and performance of the individual Directors standing for election to the Board at the Annual Meeting against the foregoing criteria, and, to the extent applicable, considered the impact of any change in the principal occupations of all Directors during the last year. Upon completion of this evaluation process, the Nominating Committee reported to the Board its conclusions and recommendations for nominations to the Board, and the Board nominated the 12 Director nominees named in this Proxy Statement based on that recommendation.
 
 
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I.  Election of Directors
 
This year, Aetna will nominate 12 individuals for election as Directors at the Annual Meeting (the “Nominees”) to replace the current Board of 13 members. The terms of office for the Directors elected at this meeting will run until the next Annual Meeting and until their successors are duly elected and qualified. The Nominating Committee recommended the 12 Nominees for nomination by the Board. Based on that recommendation, the Board nominated each of the Nominees for election at the Annual Meeting.
 
All Nominees are currently Directors of Aetna. The following pages list the names and ages of the Nominees as of the date of the Annual Meeting, the year each first became a Director of Aetna or one of its predecessors, the principal occupation of each Nominee as of March 18, 2011, the publicly traded company directorships and certain other directorships held by each Nominee for the past five years, a brief description of the business experience of each Nominee for at least the last five years, and the specific experience, qualifications, attributes and skills that each Nominee possesses. The specific experience, qualifications, attributes and skills listed below for each Nominee are in addition to the individual qualifications required for all nominees as outlined under “Director Qualifications” on page 19.
 
Each of the 12 individuals listed below (or such lesser number if the Board has reduced the number of Directors to be elected at the Annual Meeting as described beginning on page 8 under “WHAT IF A DIRECTOR NOMINEE IS UNWILLING OR UNABLE TO SERVE?”) who receives more “for” votes than “against” votes cast at the Annual Meeting will be elected Directors. In addition, as described in more detail on page 10 under “Director Elections — Majority Voting Standard,” Aetna’s Corporate Governance Guidelines require any incumbent nominee for Director in an uncontested election who receives more “against” votes than “for” votes to promptly submit his or her resignation for consideration by the Nominating Committee. The Nominating Committee and the Board are then required to act on the resignation, in each case within a reasonable period of time.
 
The Board recommends a vote FOR each of the 12 Nominees. If you complete the enclosed proxy card, unless you direct to the contrary on that card, the shares represented by that proxy card will be voted FOR the election of all 12 Nominees.
 
Nominees for Directorships
 
     
     
(PHOTO OF MARK T. BERTOLINI)
Director since 2010
  Mark T. Bertolini, age 54, is Chairman, Chief Executive Officer and President of Aetna. He was appointed Chief Executive Officer and to the Board effective November 29, 2010, and was elected Chairman effective April 8, 2011, upon Ronald A. Williams’ retirement from the Company and the Board. Before being named President in July 2007, Mr. Bertolini was Executive Vice President and head of Aetna Business Operations. He also served as head of Aetna Regional Businesses, which included Aetna’s Individual, Retiree, Small Group and Middle Market segments as well as numerous product, network and service areas. Mr. Bertolini joined Aetna as head of Aetna Specialty Products in February 2003. He came to Aetna from Cigna HealthCare, where he served in several Senior Vice President positions. Before joining Cigna, he was Executive Vice President of NYLCare Health Plans and Chief Executive Officer of SelectCare, Inc. Mr. Bertolini has been honored for his leadership by numerous organizations, including the National Italian American Foundation, National Kidney Registry, Wayne State University School of Business, and Quinnipiac University Business School. Mr. Bertolini serves on the advisory council of Hole in the Wall Gang Camp (organization serving children with life-threatening illnesses). He also serves on the board of the University of Connecticut Health Center.
 
 
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    Experience, Qualifications, Attributes and Skills
     
    We believe Mr. Bertolini brings to his position as Chairman, Chief Executive Officer and President extensive health care industry expertise, with over 25 years in the health care business. He has strong leadership skills and business experience, as he has demonstrated in numerous executive level positions at Aetna and several prior employers. He is a well-recognized leader in the health care industry and possesses deep insights into health care issues as well as broad knowledge and understanding of public policy issues affecting the Company.
     
     
(PHOTO OF FRANK M. CLARK)
Director since 2006
  Frank M. Clark, age 65, is Chairman and Chief Executive Officer of Commonwealth Edison Company (“ComEd”) (an electric energy distribution subsidiary of Exelon Corporation), a position he has held since November 2005. Mr. Clark served as President of ComEd from October 2001 to 2005 and served as Executive Vice President and Chief of Staff to the Exelon Corporation Chairman from 2004 to 2005. Since joining ComEd in 1966, Mr. Clark has risen steadily through the ranks, holding key leadership positions in operational and policy-related responsibilities, including regulatory and governmental affairs, customer service operations, marketing and sales, information technology, human resources and labor relations, and distribution support services. Mr. Clark is non-executive chairman of Harris Financial Corporation (financial services) and a director of Waste Management, Inc. (waste disposal services).
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Mr. Clark brings to the Board a broad background of senior leadership experience, gained from his over 45 years of service with ComEd and Exelon Corporation. He possesses significant management ability and business acumen. His current position as Chairman and CEO of ComEd gives Mr. Clark critical insights into the operational issues facing a large, public company. We believe that Mr. Clark is an experienced manager in a business that is intensely customer service oriented, whose knowledge of customer relations, marketing and human resources offers the Board important perspectives on similar issues affecting the Company. Mr. Clark also possesses significant public company board experience.
     
 
 
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(PHOTO OF BETSY Z. COHEN)
Director of Aetna
or its predecessors since 1994
  Betsy Z. Cohen, age 69, is Chief Executive Officer of The Bancorp, Inc. (financial holding company) and its subsidiary, The Bancorp Bank (Internet banking and financial services), a position she has held since September 2000. Mrs. Cohen served as Chairman of The Bancorp Bank from November 2003 to February 2004. From August 1997 to her retirement in December 2010, Mrs. Cohen served as Chairman and a trustee of RAIT Financial Trust (real estate investment trust). Until December 11, 2006, she also held the position of Chief Executive Officer at RAIT Financial Trust. From 1999 to 2000, Mrs. Cohen served as a director of Hudson United Bancorp (holding company), the successor to JeffBanks, Inc., where she had been Chairman and Chief Executive Officer since its inception in 1981 and also served as Chairman and Chief Executive Officer of its subsidiaries, Jefferson Bank (which she founded in 1974) and Jefferson Bank New Jersey (which she founded in 1987) prior to JeffBanks’ merger with Hudson United Bancorp in December 1999. From 1985 until 1993, Mrs. Cohen was a director of First Union Corp. of Virginia (bank holding company) and its predecessor, Dominion Bankshares, Inc. In 1969, Mrs. Cohen co-founded a commercial law firm and served as a Senior Partner until 1984.
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Mrs. Cohen brings to the Board a broad and diverse background in the financial services industry, having founded and successfully led financial institutions both in the U.S. and abroad. We believe that she possesses extensive leadership and business management expertise focused on the financial industry, an important knowledge base for the Board. Her past experience as Chairman and CEO of several institutions, including JeffBanks, Inc., one of Philadelphia’s largest financial institutions, positions her well to serve as the chair of our Committee on Compensation and Organization. Mrs. Cohen has extensive legal, financial and real estate investment expertise and has been recognized both nationally and internationally for her business acumen and leadership skills, which contribute important expertise to the Board.
     
     
     
 
 
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(PHOTO OF MOLLY J. COYE)
Director since 2005
  Molly J. Coye, M.D., 64, is Chief Innovation Officer of the UCLA Health System (comprehensive health care organization), a position she has held since September 2010. Before assuming her current position, Dr. Coye served as President and Chief Executive Officer of CalRHIO (non-profit California health information exchange organization) and Chief Executive Officer of the Health Technology Center (non-profit education and research organization), which she founded in December 2000. She also served as a Senior Advisor to the Public Health Institute until January 2010. Previously, Dr. Coye served in both the public and private sectors as Senior Vice President of the West Coast Office of The Lewin Group (consulting) from 1997 to December 2000; Executive Vice President, Strategic Development, of HealthDesk Corporation from 1996 to 1997; Senior Vice President, Clinical Operations, Good Samaritan Health Hospital from 1993 to 1996; Director of the California Department of Health Services from 1991 to 1993; Head of the Division of Public Health, Department of Health Policy and Management, Johns Hopkins School of Hygiene and Public Health from 1990 to 1991; Commissioner of Health of the New Jersey State Department of Health from 1986 to 1989; Special Advisor for Health and the Environment, State of New Jersey Office of the Governor from 1985 to 1986; and National Institute for Occupational Safety and Health Medical Investigative Officer from 1980 to 1985. She is chair of PATH (non-profit organization developing technologies for international health) and serves as an advisor to the Health Evolution Partners Innovation Network, a health-related investment fund. Dr. Coye also serves on the Board of Directors of Aetna Foundation, Inc.
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Dr. Coye brings to the Board significant clinical, health policy and health-related technology expertise. She has developed this expertise through over 30 years of service in the public and private health care sectors, where she has managed major research studies, led health technology initiatives and held several senior advisory roles. Her in-depth knowledge of innovative health information technology and global health issues provides the Board with valuable insights into an area of growing importance to the Company.
     
 
 
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(PHOTO OF ROGER N. FARAH)
Director since 2007
  Roger N. Farah, age 58, has been President, Chief Operating Officer and a Director of Polo Ralph Lauren Corporation (lifestyle products) since April 2000. Prior to that, he served as Chairman of the Board of Venator Group, Inc. (now Foot Locker, Inc.) from December 1994 to April 2000, and as its Chief Executive Officer from December 1994 to August 1999. Mr. Farah served as President and Chief Operating Officer of R.H. Macy & Co., Inc. (retailing) from July 1994 to October 1994. From June 1991 to July 1994, he was Chairman and Chief Executive Officer of Federated Merchandising Services (retailing), the central buying and product development arm of Federated Department Stores, Inc. (retailing). From 1988 to 1991, Mr. Farah served as Chairman and Chief Executive Officer of Rich’s/Goldsmith’s Department Stores (retailing) and President from 1987 to 1988. He held a number of positions of increasing responsibility at Saks Fifth Avenue, Inc. (retailing) from 1975 to 1987. Mr. Farah is a director of The Progressive Corporation (auto insurance). He also served as a director of Toys “R” Us, Inc. from September 2001 to May 2006.
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Mr. Farah brings to the Board extensive business and leadership experience. He has strong marketing, brand management and consumer insights developed in his over 35 years of experience in the retail industry. His current position as chief operating officer of Polo Ralph Lauren Corporation gives Mr. Farah an important perspective on the complex financial and operational issues facing the Company. He also possesses significant public company board experience as demonstrated by his past and current service on a number of public company boards.
     
 
 
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(PHOTO OF BARBARA HACKMAN FRANKLIN)
Director of Aetna
or its predecessors from 1979 to 1992 and since 1993
  Barbara Hackman Franklin, age 71, is President and Chief Executive Officer of Barbara Franklin Enterprises (private international consulting firm). From 1992 to 1993, she served as the 29th U.S. Secretary of Commerce. Prior to that appointment, Ms. Franklin was President and Chief Executive Officer of Franklin Associates (management consulting firm), which she founded in 1984. She has received the John J. McCloy Award for contributions to audit excellence, the Director of the Year Award from the National Association of Corporate Directors, an Outstanding Director Award from the Outstanding Director Exchange, and was named by Directorship Magazine as one of the 100 most influential people in governance. Ms. Franklin was Senior Fellow of The Wharton School of Business from 1979 to 1988, an original Commissioner and Vice Chair of the U.S. Consumer Product Safety Commission from 1973 to 1979, and a Staff Assistant to the President of the United States from 1971 to 1973. Earlier, she was an executive at Citibank and the Singer Company. Ms. Franklin is a director of The Dow Chemical Company (chemicals, plastics and agricultural products) and is also a trustee of three funds in the American Funds family of mutual funds and a director of J.P. Morgan Value Opportunities Fund. She is Chairman of the National Association of Corporate Directors, Chairman Emerita of the Economic Club of New York, a director of the US-China Business Council and the Atlantic Council. Ms. Franklin is a regular commentator on the PBS Nightly Business Report. Ms. Franklin served as a director of MedImmune, Inc. from November 1995 to June 2007 and GenVec, Inc. from October 2002 to April 2007.
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Ms. Franklin brings to the Board a wealth of business and leadership experience from her private and public sector accomplishments over more than 40 years. She is a recognized expert on corporate governance, auditing and financial reporting matters whose expertise has helped the Board navigate the changing governance landscape. Her extensive senior-level government service (Cabinet, regulatory commission, White House) provides the Board with unique perspectives into the political, regulatory, and international environment affecting the Company. Ms. Franklin has extensive international business expertise, demonstrated by her service as Secretary of Commerce, her private sector business experience and her past service on the President’s Advisory Committee for Trade Policy and Negotiations. Ms. Franklin also possesses significant public company board experience as demonstrated by her past service on fourteen public company boards, including Dow Chemical. She has served as a presiding director and the chair of audit, ethics and governance committees.
     
 
 
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(PHOTO OF JEFFREY E. GARTEN)
Director of Aetna
Or its predecessors since 2000
  Jeffrey E. Garten, age 64, has been the Juan Trippe Professor in the Practice of International Trade, Finance and Business at Yale University since July 1, 2005, having served previously as the Dean of the Yale School of Management since 1995. He also is Chairman of Garten Rothkopf (global consulting firm), a position he assumed in October 2005. Mr. Garten held senior posts on the White House staff and at the U.S. Department of State from 1973 to 1979. He joined Shearson Lehman Brothers (investment banking) in 1979 and served as Managing Director from 1984 to 1987. In 1987, Mr. Garten founded Eliot Group, Inc. (investment banking) and served as President until 1990, when he became Managing Director of The Blackstone Group (private merchant bank). From 1992 to 1993, Mr. Garten was Professor of Finance and Economics at Columbia University’s Graduate School of Business. He was appointed U.S. Under Secretary of Commerce for International Trade in 1993 and served in that position until 1995. Mr. Garten is a director of CarMax, Inc. (automotive retailer) and is also a director of seven Credit Suisse mutual funds. He is the author of A Cold Peace: America, Japan, Germany and the Struggle for Supremacy; The Big Ten: Big Emerging Markets and How They Will Change Our Lives; The Mind of the CEO; and The Politics of Fortune: A New Agenda for Business Leaders. Mr. Garten is a director of The Conference Board, the International Rescue Committee and Aetna Foundation, Inc. He also serves on the Board of Managers of Standards & Poor’s LLC, a division of The McGraw-Hill Companies. Mr. Garten served as a director of Alcan Inc. from February 2007 to November 2007.
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Mr. Garten brings to the Board extensive experience in global investment banking and many years of government service during which he held senior policy positions that focused on trade and investment. His background includes work with corporations in the United States and abroad, Congress, regulatory agencies and foreign governments. He possesses significant business and leadership experience as the former Dean of the Yale School of Management and as a current principal of Garten Rothkopf, an international consulting firm. Mr. Garten is a recognized expert on finance and international trade, and has written extensively on leadership, the relationship between business and government and the challenges of operating in a global marketplace. His experience leading a national working group on accounting standards and as a former advisor to the Public Company Accounting Oversight Board provides him with a thorough understanding of accounting issues. Mr. Garten also possesses significant public company board experience.
     
 
 
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(PHOTO OF GREENWALD)
Director of Aetna
Or its predecessors since 1993
  Gerald Greenwald, age 75, is a founding principal of the Greenbriar Equity Group (invests in the global transportation industry). Mr. Greenwald retired in July 1999 as Chairman and Chief Executive Officer of UAL Corporation and United Airlines (UAL), its principal subsidiary, having served in those positions since July 1994. Mr. Greenwald held various executive positions with Chrysler Corporation (automotive manufacturer) from 1979 to 1990, serving as Vice Chairman of the Board from 1989 to May 1990 and as Chairman of Chrysler Motors from 1985 to 1988. In 1990, Mr. Greenwald was selected to serve as Chief Executive Officer of United Employee Acquisition Corporation in connection with the proposed 1990 employee acquisition of UAL. From 1991 to 1992, he was a Managing Director of Dillon Read & Co., Inc. (investment banking) and, from 1992 to 1993, he was President and Deputy Chief Executive Officer of Olympia & York Developments Ltd. (Canadian real estate company). Mr. Greenwald then served as Chairman and Managing Director of Tatra Truck Company (truck manufacturer in the Czech Republic) from 1993 to 1994. He is a trustee of the Aspen Institute and chair of the Infrastructure, Safety and Environment Advisory Council of The RAND Corporation. Mr. Greenwald was named a 2011 Outstanding Director by the Outstanding Director Exchange. Mr. Greenwald served as a director of Internet Brands, Inc. from September 1999 to May 2008 and Sentigen Holding Corporation from June 2001 to December 2006.
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Mr. Greenwald brings to the Board extensive financial and management experience obtained through over 30 years of executive level business experience, primarily in the transportation industries. His experience leading several major public companies gives him important knowledge and insight into the complex issues facing the Company, in particular on the operational, financial and corporate governance fronts. These experiences provide Mr. Greenwald with a thorough understanding of and appreciation for the role of the Board and position him well to serve as our Presiding Director and Chair of our Investment and Finance Committee. Mr. Greenwald also possesses significant public company board experience as demonstrated by his past service on the boards noted above, as well as those of Reynolds Metals Company, Time Warner Inc. and Honeywell International Inc., among others.
     
 
 
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(PHOTO OF ELLEN M. HANCOCK)
Director of Aetna
Or its predecessors since 1995
  Ellen M. Hancock, age 68, served as the President of Jazz Technologies, Inc. and President and Chief Operating Officer of its predecessor, Acquicor Technology Inc., from August 2005 to June 2007. Prior to its merger with Jazz Semiconductor, Inc., a wafer foundry, in February 2007, Jazz Technologies (then known as Acquicor) was a blank check company formed for the purpose of acquiring businesses in the technology, multimedia and networking sector. Mrs. Hancock previously served as Chairman of the Board and Chief Executive Officer of Exodus Communications, Inc. (Internet system and network management services). She joined Exodus in March 1998 and served as Chairman from June 2000 to September 2001, Chief Executive Officer from September 1998 to September 2001, and President from March 1998 to June 2000. Mrs. Hancock held various staff, managerial and executive positions at International Business Machines Corporation (information-handling systems, equipment and services) from 1966 to 1995. She became a Vice President of IBM in 1985 and served as President, Communication Products Division, from 1986 to 1988, when she was named General Manager, Networking Systems. Mrs. Hancock was elected an IBM Senior Vice President in November 1992, and in 1993 was appointed Senior Vice President and Group Executive, a position she held until February 1995. Mrs. Hancock served as an Executive Vice President and Chief Operating Officer of National Semiconductor Corporation (semiconductors) from September 1995 to May 1996, and served as Executive Vice President for Research and Development and Chief Technology Officer of Apple Computer, Inc. (personal computers) from July 1996 to July 1997. Mrs. Hancock is a director of Colgate-Palmolive Company (consumer products). Mrs. Hancock served as a director of Watchguard Technologies, Inc. from April 2003 to May 2006, Electronic Data Systems Corporation from February 2004 to August 2008, and Acquicor Technology, Inc. from February 2006 to June 2007.
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Mrs. Hancock brings to the Board highly relevant experience in the field of information technology and consumer products, where she has held senior leadership positions and also led a start-up company. Her technology background provides the Board with an important perspective on the health information technology challenges and opportunities of the Company. Mrs. Hancock also has significant public company board experience. Her experience positions her well as Chair of the Nominating Committee.
     
 
 
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(PHOTO OF RICHARD J. HARRINGTON)
Director since 2008
  Richard J. Harrington, age 64, served as President and Chief Executive Officer of The Thomson Corporation (business technology and integrated information solutions) prior to its acquisition by Reuters Group PLC in April 2008. From April 2008 to October 2009, he served as Chairman of the Thomson Reuters Foundation. He currently serves as Chairman of The Cue Ball Group (a venture capital firm) and Knovel Corporation (web-based application integrating technical information). Mr. Harrington held a number of senior leadership positions within Thomson between 1982 and April 2008, including CEO of Thomson Newspapers, and CEO of Thomson Professional Publishing. Mr. Harrington began his professional career with Arthur Young & Co. (public accounting firm) in 1972, where he became a licensed certified public accountant. In 2002, he was presented an Honorary Doctorate of Laws from University of Rhode Island. In 2007, he received the “Legend in Leadership” award from the Yale University Chief Executive Leadership Institute; the “CEO of the Year” award from the Executive Council; and the “Man of the Year” award from the National Executive Council for his many philanthropic activities. Mr. Harrington is a director of Xerox Corporation (document management, technology and service enterprise). He is also a director of Milliken & Co.
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Mr. Harrington brings to the Board the skills and insights of a seasoned business leader with over 25 years’ experience in the business technology and information solutions area. He has strategic vision and leadership expertise, and led The Thomson Corporation at the time of its acquisition by Reuters Group PLC. Mr. Harrington’s experience in change management and strategic differentiation gives the Board a unique perspective on these important issues. Mr. Harrington, who has worked as a certified public accountant, also chairs the audit committee of Xerox Corporation. These experiences position him well to serve as Chair of our Audit Committee.
     
 
 
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(PHOTO OF EDWARD J. LUDWIG)
Director since 2003
  Edward J. Ludwig, age 59, serves as Chairman of the Board and Chief Executive Officer of Becton, Dickinson and Company (“BD”) (global medical technology company). He was elected Chairman of the Board in February 2002, Chief Executive Officer in January 2000 and served as President from May 1999 to December 31, 2008. Mr. Ludwig joined BD as a Senior Financial Analyst in 1979. Prior to joining BD, Mr. Ludwig served as a senior auditor with Coopers and Lybrand (now PricewaterhouseCoopers) and as a financial and strategic analyst at Kidde, Inc. He is a member of the Board of Trustees of the College of the Holy Cross and a member and past Chair of the Health Advisory Board for the Johns Hopkins Bloomberg School of Public Health. He also chairs the Advisory Board of the Hackensack (NJ) University Medical Center and is a Board member of Project Hope.
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Mr. Ludwig brings to the Board significant executive-level leadership experience and business expertise. His more than 30 years of experience in the field of medical technology give Mr. Ludwig a unique perspective on the Company’s strategy. As an active CEO, Mr. Ludwig brings a thorough appreciation of the strategic and operational issues facing a large public company in the health care industry. Mr. Ludwig served as chief financial officer of a Fortune 500 company and has worked as a certified public accountant. He offers the Board a deep understanding of financial, accounting and audit-related issues.
     
 
 
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(PHOTO OF JOSEPH P. NEWHOUSE)
Director since 2001
  Joseph P. Newhouse, age 69, is the John D. MacArthur Professor of Health Policy and Management at Harvard University, a position he assumed in 1988. At Harvard, he also is Director of the Division of Health Policy Research and Education, Director of the Interfaculty Initiative on Health Policy, Chair of the Committee on Higher Degrees in Health Policy and a member of the faculties of the John F. Kennedy School of Government, the Harvard Medical School, the Harvard School of Public Health and the Faculty of Arts and Sciences. Prior to joining Harvard, Dr. Newhouse held various positions at The RAND Corporation from 1968 to 1988, serving as a faculty member of the RAND Graduate School from 1972 to 1988, as Deputy Program Manager for Health Sciences Research from 1971 to 1988, Senior Staff Economist from 1972 to 1981, Head of the Economics Department from 1981 to 1985 and as a Senior Corporate Fellow from 1985 to 1988. Dr. Newhouse is the Editor of the Journal of Health Economics, which he founded in 1981. He is a Faculty Research Associate of the National Bureau of Economic Research, a member of the Institute of Medicine of the National Academy of Sciences, a member of the New England Journal of Medicine Editorial Board, a fellow of the American Academy of Arts and Sciences, and a director of the National Committee for Quality Assurance. Dr. Newhouse is the author of Free for All: Lessons from the RAND Health Insurance Experiment and Pricing the Priceless: A Health Care Conundrum. He also serves on the Board of Directors of Aetna Foundation, Inc.
     
    Experience, Qualifications, Attributes and Skills
     
    We believe Dr. Newhouse’s experience of over 40 years in the health policy arena significantly enhances the Board’s understanding of health policy issues, which is particularly important in the current public policy environment. He has written extensively on U.S. health policy matters, and he is a highly-regarded expert in economics and business. Dr. Newhouse’s expertise in health policy and health care financing has enhanced the Board’s understanding of these issues.
 
 
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Other Director Information
 
As previously disclosed, Ronald A. Williams retired from the Company and the Board on April 8, 2011.
 
In accordance with Aetna’s Corporate Governance Guidelines regarding retirement age, Earl G. Graves is not standing for re-election at the Annual Meeting. Mr. Graves has been a Director of Aetna or its predecessors since 1994 and will continue as a Director until his term ends immediately prior to the Annual Meeting. Mr. Graves’ vacancy will not be filled at the Annual Meeting, and, as a result, the size of the Board will be reduced from 13 to 12 Directors. Mr. Graves, age 76, is Chairman of Earl G. Graves, Ltd. (a multimedia company with properties in television, radio, events, digital media and the Internet), having served as Chairman since 1972. He also served as Chief Executive Officer from 1972 to 2006. He is the Managing Partner of Graves Ventures, Inc. and also the Publisher of Black Enterprise magazine, which he founded in 1970. Additionally, since 1998, Mr. Graves has been a Managing Director of Black Enterprise/Greenwich Street Corporate Growth Partners, L.P. Mr. Graves is a trustee of Howard University, a member of the Executive Board and Executive Committee of the National Office of the Boy Scouts of America and a Fellow of the American Academy of Arts & Sciences. He also serves on the Board of Directors of Aetna Foundation, Inc. and the Black Enterprise B.R.I.D.G.E. Foundation. Mr. Graves served as a director of AMR Corp. and American Airlines from April 1995 to March 2008, Federated Department Stores from May 1994 to July 2005 and Rohm and Haas Company from 1984 to May 2005. Mr. Graves served as a member of the Supervisory Board of DaimlerChrysler AG from 2001 to 2007, having served as a director of its predecessor, Chrysler Corporation, and as Chairman of Pepsi African American Advisory Board from 1999 to 2008. Mr. Graves has brought to the Board a distinguished career in the communications business, highlighted by his entrepreneurial business and professional experiences. We believe that Mr. Graves is an established leader in encouraging business growth, with strong marketing, consumer and brand insights developed over 35 years. Mr. Graves possesses significant public company board experience as demonstrated by his past service on numerous boards, including American Airlines and Chrysler Corporation, among others.
 
Director Compensation Philosophy and Elements
 
Each year, the Nominating Committee reviews compensation for nonmanagement Directors and makes recommendations regarding the prospective level and composition of Director compensation to the Board for its approval.
 
The Nominating Committee’s goal is to develop a compensation program that:
 
•  Attracts and retains qualified Directors;
 
•  Recognizes Directors’ critical contributions; and
 
•  Aligns, through the offering of stock-based compensation, the interests of Aetna’s Directors with the long-term interests of our shareholders.
 
As part of their review, the Nominating Committee and the Board consider, among other factors, the Director compensation practices at a comparative group of public companies (the “comparative group”), based on market comparison studies prepared by Cook, an outside consultant. Cook also serves as the compensation consultant to the Compensation Committee as described on page 17.
 
The primary elements of Aetna’s Director compensation program are annual cash retainer fees and annual restricted stock unit (“RSU”) awards. Directors also receive certain benefits. Directors who are officers of Aetna receive no additional compensation for membership on the Board or any of its Committees. In 2010, the Presiding Director received no additional compensation for his service as Presiding Director.
 
Director Stock Ownership Guidelines
 
The Board has established Director Stock Ownership Guidelines under which each nonmanagement Director is required to own, within five years of joining the Board, shares of Common Stock or stock units
 
 
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having a dollar value equal to $400,000. As of March 18, 2011, all of Aetna’s nonmanagement Directors are in compliance with these guidelines.
 
Aetna’s Code of Conduct prohibits Directors from engaging in hedging strategies using puts, calls or other types of derivative securities based on the value of the Common Stock.
 
2010 Nonmanagement Director Compensation
 
For 2010, Director compensation for Aetna’s nonmanagement Directors approximated the median level paid to nonmanagement directors in the prior year in the comparative group.
 
The 2010 comparative group is a blend of:
 
•  Public health care companies consisting of Assurant, Inc., CIGNA Corporation, Coventry Health Care, Inc., Health Net, Inc., Humana Inc., UnitedHealth Group Incorporated and WellPoint, Inc. (the “Public Health Care Company Group”);
 
•  The companies listed in the 2010 Frederic W. Cook & Co., Inc. Non-Employee Director Compensation Report of the 100 largest New York Stock Exchange companies; and
 
•  The companies listed in the National Association of Corporate Directors (“NACD”) 2009/2010 Director Compensation Report for companies with revenues greater than $10 billion.
 
Competitive data indicate that on a per director basis, Aetna’s nonmanagement Director compensation level is between the 25th percentile and the median of the Public Health Care Company Group. According to the NACD data, Aetna’s nonmanagement Director compensation level is between the median and the 75th percentile of general industry peers of similar size in terms of the value of all compensation, including equity compensation.
 
Details regarding retainer fees for Board and Committee service are set forth in footnote 1 to the 2010 Director Compensation Table beginning below on page 33.
 
The 2010 Director Compensation Table sets forth for 2010 the total compensation of each of the nonmanagement Directors. Actual compensation for any Director, and amounts shown in the 2010 Director Compensation Table, may vary by Director due to the Committees on which a Director serves and other factors described in footnote 3 to the 2010 Director Compensation Table.
 
2010 Director Compensation Table
 
                                 
 
    Fees Earned
           
    or Paid
  Stock
  All Other
   
    in Cash
  Awards
  Compensation
  Total
Name   (1)   (2)   (3)   (4)
 
 
Frank M. Clark
  $ 59,000     $ 160,024     $ 21,846     $ 240,870  
Betsy Z. Cohen
    68,000       160,024       16,146       244,170  
Molly J. Coye, M.D. 
    58,000       160,024       22,548       240,572  
Roger N. Farah
    59,000       160,024       14,634       233,658  
Barbara Hackman Franklin
    67,750       160,024       17,868       245,642  
Jeffrey E. Garten
    59,000       160,024       20,048       239,072  
Earl G. Graves
    66,500       160,024       17,568       244,092  
Gerald Greenwald
    67,000       160,024       25,068       252,092  
Ellen M. Hancock
    64,167       160,024       36,146       260,337  
Richard J. Harrington
    65,250       160,024       7,190       232,464  
Edward J. Ludwig
    70,875       160,024       14,634       245,533  
Joseph P. Newhouse
    69,500       160,024       16,521       246,045  
 
 
 
(1)  The amounts shown in this column may include cash compensation that was deferred by Directors during 2010 under the Aetna Inc. Non-Employee Director Compensation Plan. See “Additional
 
 
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Director Compensation Information” beginning on page 35 for a discussion of Director compensation deferrals. Amounts in this column consist of one or more of the following:
 
         
    Fees Earned
    or Paid
Activity   in Cash
 
 
Annual Retainer Fee
  $ 50,000  
Chairman of the Audit Committee
    15,000  
Membership on the Audit Committee
    7,500  
Chairman of the Compensation Committee
    10,000  
Membership on the Compensation Committee
    5,000  
Chairman of the Nominating Committee
    10,000  
Membership on the Nominating Committee
    5,000  
Chairman of the Investment and Finance Committee
    8,000  
Chairman of the Medical Affairs Committee
    8,000  
Committee Membership (except as set forth above) (other than the Chairs)
    4,000  
 
 
 
(2)  Amounts shown in this column represent the full grant date fair value for RSUs granted in 2010. On May 21, 2010, Aetna granted each nonmanagement Director then in office 5,568 RSUs. The full grant date fair value is calculated by multiplying the number of units granted times the closing price of Aetna’s Common Stock on the date of grant. See “Additional Director Compensation Information” beginning on page 35 for a discussion of various stock unit awards and their respective deferrals.
 
As of December 31, 2010, each Director held 2,784 unvested stock awards, consisting solely of RSUs. Refer to the Beneficial Ownership Table on page 38 for more information on Director holdings of Aetna’s Common Stock.
 
(3)  All Other Compensation consists of the items in the following table. See “Additional Director Compensation Information” beginning on page 35 for a discussion of certain components of All Other Compensation.
 
                                 
    Group Life
           
    Insurance and Business
      Matching
   
    Travel Accident Insurance
  Charitable Award
  Charitable
   
    Premiums   Program(a)   Contributions(b)   Total
 
 
Frank M. Clark
  $ 2,288     $ 13,858     $ 5,700     $ 21,846  
Betsy Z. Cohen
    2,288       13,858       0       16,146  
Molly J. Coye, M.D. 
    1,190       13,858       7,500       22,548  
Roger N. Farah
    776       13,858       0       14,634  
Barbara Hackman Franklin
    3,710       13,858       300       17,868  
Jeffrey E. Garten
    1,190       13,858       5,000       20,048  
Earl G. Graves
    3,710       13,858       0       17,568  
Gerald Greenwald
    3,710       13,858       7,500       25,068  
Ellen M. Hancock
    2,288       13,858       20,000       36,146  
Richard J. Harrington
    1,190       0       6,000       7,190  
Edward J. Ludwig
    776       13,858       0       14,634  
Joseph P. Newhouse
    2,288       13,858       375       16,521  
 
 
  (a)  Refer to “Director Charitable Award Program” on page 36 for information about the Charitable Award Program, which was discontinued for any new Director joining the Board after January 25, 2008. Amounts shown are pre-tax, and do not reflect the anticipated tax benefit to the Company from the charitable contributions under the Charitable Award Program. Directors derive no personal financial or tax benefit from the program.
 
  (b)  These amounts represent matching contributions made by Aetna Foundation, Inc. pursuant to Aetna’s charitable giving programs, which encourage contributions by eligible persons toward charitable organizations. Under these programs, Aetna Foundation, Inc. provides a match (60% in
 
 
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  2010) of contributions up to $10,000 per person per program year during the Company’s annual Giving Campaign, and provides a prorated match (30% in 2010) of contributions up to $5,000 per person per program year at any other time during the calendar year. Amounts shown are pre-tax. These programs are available on the same basis to all Directors and full-time and part-time employees. Directors derive no personal financial or tax benefit from these programs. Mrs. Hancock’s 2010 matching charitable contribution is attributable to the donations she made in 2009 and 2010.
 
(4)  The Company has not granted stock appreciation rights (“SARs”) to nonmanagement Directors and has not granted stock options to nonmanagement Directors since 2004. Therefore, no amount associated with SARs or stock options is included in this column. As of December 31, 2010, the only outstanding stock options held by Directors were as follows: Betsy Z. Cohen, 55,200; Earl G. Graves, 55,200; Ellen M. Hancock, 26,735; Edward J. Ludwig, 14,000; and Joseph P. Newhouse, 35,068.
 
Additional Director Compensation Information
 
Director Deferrals
 
The amounts shown in the “Fees Earned or Paid in Cash” and “Stock Awards” columns of the 2010 Director Compensation Table include amounts that were deferred by Directors during 2010 under the Aetna Inc. Non-Employee Director Compensation Plan (the “Director Plan”). Under the Director Plan, nonmanagement Directors may defer payment of some or all of their annual retainer fees, vested RSUs and dividend equivalents paid on stock units to an unfunded stock unit account or unfunded interest account until after they have resigned or retired (as defined in the Director Plan) from the Board or elect to diversify their stock unit holdings as described below.
 
During the period of deferral, amounts deferred to the stock unit account track the value of the Common Stock and earn dividend equivalents. During the period of deferral, amounts deferred to the interest account accrue interest pursuant to a formula equal to the rate of interest paid from time to time under the fixed interest rate fund option of the 401(k) Plan (3.9% per year for the period January to June 2011).
 
Under the Director Plan, beginning at age 68, Directors are allowed to make an annual election to diversify up to 100% of their voluntary deferrals into the stock unit account out of stock units and into an interest account. During 2010, no Directors made such a diversification election. Directors who make a diversification election remain subject to the Board’s Director Stock Ownership Guidelines.
 
Stock Unit and Restricted Stock Unit Awards
 
Pursuant to the Director Plan, nonmanagement Directors, upon their initial election to the Board, receive a one-time grant of deferred stock units (“Initial Units”) convertible upon retirement from Board service into 6,000 shares of the Common Stock. Generally, to become fully vested in the Initial Units, a Director must complete three years of service following the grant. If service is terminated sooner by reason of death, disability, retirement or acceptance of a position in government service, a Director is entitled to receive the full grant if the Director has completed a minimum of six consecutive months of service as a Director from the date of grant.
 
A Director’s right with respect to unvested units also will vest upon a change in control of Aetna (as defined in the Director Plan). If a Director terminates Board service prior to completion of one year of service from the grant date of any Initial Units that have not otherwise vested under the terms of the Director Plan, the Director will be entitled to receive a pro rata portion of the award. Although Directors receive dividend equivalents on the deferred stock units, they have no voting rights with respect to the units granted. The deferred stock units granted are not transferable.
 
On May 21, 2010, Aetna granted each nonmanagement Director then in office 5,568 RSUs under the Director Plan. The full grant date fair value of the RSUs granted to each nonmanagement Director was $160,024. The RSUs vest in quarterly increments over a one-year period beginning May 21, 2010, and are payable at the end of the one-year period in shares of the Common Stock or can be deferred under the
 
 
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Director Plan to a stock unit account or an interest account as described above. The RSUs granted to a nonmanagement Director will vest immediately if the Director ceases to be a Director because of death, disability, retirement or acceptance of a position in government service. All RSUs granted to nonmanagement Directors also will vest upon a change in control of Aetna (as defined in the Director Plan).
 
Director Charitable Award Program
 
Prior to January 26, 2008, Aetna maintained a Director Charitable Award Program (the “Program”) for nonmanagement Directors serving on the Board. After a review of the Program and competitive practices, the Board decided to close the Program, and any Director who first joins the Board after January 25, 2008 will not be eligible to participate. However, to recognize pre-existing commitments, the Program remains in place for Directors serving prior to that date. Under the Program, Aetna will make a charitable contribution of $1 million in ten equal annual installments allocated among up to five charitable organizations recommended by a participating Director once he or she reaches age 72. For Mr. Farah, who joined the Board in 2007, contributions would occur once he reaches age 75. The Program may be funded indirectly by life insurance on the lives of the participating Directors. Mr. Harrington is not eligible to participate in the Program because he joined the Board after the Program closed to new Directors.
 
Beneficiary organizations recommended by Directors must be, among other things, tax exempt under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). Donations Aetna ultimately makes are expected to be deductible from Aetna’s taxable income for purposes of U.S. federal and other income taxes. Directors derive no personal financial or tax benefit from the Program, since all insurance proceeds and charitable deductions accrue solely to Aetna.
 
The Program values included in footnote 3 to the 2010 Director Compensation Table on page 34 represent an estimate of the present value of the total annual economic net cost of the Program, pre-tax, for current and former Directors, allocated equally among the Directors still participating in the Program. The present value calculation considers estimates of (a) premiums paid on whole life insurance policies purchased with respect to certain of the Directors to fund part of the Program; (b) the expected future charitable contributions to be paid by Aetna on behalf of current and former Directors; (c) expenses associated with administering the Program; and (d) the expected future proceeds from such whole life insurance policies which are, in turn, based on expected mortality, as well as assumptions related to future investment returns of the policies. The discount rate applied in such present value calculation is 3.5%. The Program value increased from the 2009 value primarily due to higher premium payments on the underlying insurance policies.
 
Other Benefits
 
Aetna provides $150,000 of group life insurance and $100,000 of business travel accident insurance (which includes accidental death and dismemberment coverage) for its nonmanagement Directors. Optional medical, dental and long-term care coverage for nonmanagement Directors and their eligible dependents also is available to Directors at a cost similar to that charged to Aetna employees and may be continued into retirement by eligible Directors.
 
Aetna also reimburses nonmanagement Directors for the out-of-pocket expenses they incur that pertain to Board membership, including travel expenses incurred in connection with attending Board, Committee and shareholder meetings, and for other Aetna business-related expenses (including the business-related travel expenses of spouses if they are specifically invited to attend an event).
 
From time to time, Aetna also may transport Directors to and from Board meetings or Directors and their guests to and from other Aetna business functions on Company aircraft.
 
2011 Nonmanagement Director Compensation
 
Following a review with Cook, the Board set the value of cash and equity compensation for nonmanagement Directors for 2011 to be the same as their 2010 cash and equity compensation.
 
 
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Certain Transactions and Relationships
 
Mrs. Hancock resigned as Chairman of the Board and Chief Executive Officer of Exodus Communications, Inc. on September 4, 2001. Exodus filed a voluntary petition under Chapter 11 of the federal bankruptcy laws on September 26, 2001.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Securities Exchange Act of 1934 requires our Directors, our executive officers and certain other persons to file reports of holdings and transactions in our Common Stock with the SEC. Based on our records and other information, we believe that during our fiscal year ended December 31, 2010, our Directors and executive officers timely met all applicable SEC filing requirements, except that the initial Form 3 filed on behalf of Ms. McCarthy was amended after the filing date to correct the number of securities beneficially owned and one late Form 4 was filed on behalf of Ms. McCarthy with respect to a single sale of 200 shares of Common Stock. This transaction was entered into on Ms. McCarthy’s behalf by her broker and was reported by Ms. McCarthy as soon as it was brought to her attention.
 
Security Ownership of Certain Beneficial Owners, Directors, Nominees and Executive Officers
 
The following table presents, as of December 31, 2010, the names of the only persons known to Aetna to be the beneficial owners of more than 5% of the outstanding shares of our Common Stock. The information set forth in the table below and in the related footnotes was furnished by the identified persons to the SEC.
 
         
 
Name and Address of
  Amount and Nature
   
Beneficial Owner   of Beneficial Ownership   Percent
 
 
BlackRock, Inc.    32,890,442(1)   8.56%
40 East 52nd Street        
New York, NY 10022        
         
Capital World Investors   29,736.600(2)   7.74%
333 South Hope Street        
Los Angeles, CA 90071        
         
State Street Corporation   24,542,539(3)   6.39%
State Street Financial Center        
One Lincoln Street        
Boston, MA 02111        
 
 
 
(1)  Of the reported shares of Common Stock, BlackRock, Inc. reports that it has sole voting and sole dispositive power with respect to 32,890,442 shares.
 
(2)  Of the reported shares of Common Stock, Capital World Investors reports that it has sole voting power with respect to 22,336,600 shares and sole dispositive power with respect to 29,736,600 shares.
 
(3)  Of the reported shares of Common Stock, State Street Corporation reports that it has shared voting and shared dispositive power with respect to 24,542,539 shares. Of the reported shares of Common Stock, 9,439,701 shares are held by State Street Corporation in its capacity as the trustee of the 401(k) Plan.
 
 
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Beneficial Ownership Table
 
The following table presents, as of March 18, 2011, the beneficial ownership of, and other interests in, shares of our Common Stock of each current Director, each Nominee, each executive officer named in the 2010 Summary Compensation Table on page 56, and Aetna’s Directors and executive officers as a group. The information set forth in the table below and in the related footnotes has been furnished by the respective persons.
 
                         
    Amount and Nature of Beneficial Ownership
 
          Percent of
  Common
     
Name of Beneficial
  Common
    Common
  Stock
     
Owner and Position   Stock     Stock   Equivalents(15)     Total
 
 
Frank M. Clark     1,000 (1)   *     23,419 (16)   24,419
(current Director and Nominee)                        
Betsy Z. Cohen     71,484 (2)   *     76,105 (16)   147,589
(current Director and Nominee)                        
Molly J. Coye, M.D.      9,617     *     19,184 (16)   28,801
(current Director and Nominee)                        
Roger N. Farah     3,000     *     27,381 (16)   30,381
(current Director and Nominee)                        
Barbara Hackman Franklin     21,652     *     45,284 (16)   66,936
(current Director and Nominee)                        
Jeffrey E. Garten     14,123 (1)   *     30,324 (16)   44,447
(current Director and Nominee)                        
Earl G. Graves     57,200 (3)   *     74,798 (16)   131,998
(current Director)                        
Gerald Greenwald     14,823 (4)   *     62,211 (16)   77,034
(current Director and Nominee)                        
Ellen M. Hancock     41,145 (5)   *     108,771 (16)   149,916
(current Director and Nominee)                        
Richard J. Harrington     414     *     22,684 (16)   23,098
(current Director and Nominee)                        
Edward J. Ludwig     23,391 (6)   *     36,598 (16)   59,989
(current Director and Nominee)                        
Joseph P. Newhouse     37,068 (7)   *     54,178 (16)   91,246
(current Director and Nominee)                        
Mark T. Bertolini     1,626,312 (8)   *     553,751 (17)   2,180,063
(Chairman, Chief Executive Officer and President, current Director and Nominee)                        
William J. Casazza     462,081 (9)   *     155,175 (18)   617,256
(named executive)                        
Margaret M. McCarthy     181,293 (10)   *     248,213 (19)   429,506
(named executive)                        
Lonny Reisman, M.D.      191,993 (11)   *     108,167 (20)   300,160
(named executive)                        
Joseph M. Zubretsky     662,133 (12)   *     414,551 (21)   1,076,684
(named executive)                        
Ronald A. Williams     5,553,317 (13)   1.44%     1,196,460 (22)   6,749,777
(Retired Chairman, former Chief Executive Officer and                        
former Director)
Directors and executive
    8,972,046 (14)   2.31%     3,257,254 (23)   12,229,300
Officers as a group (18 persons)                        
 
 
*  Less than 1%
 
Unless noted in the footnotes beginning on page 39, each person currently has sole voting and investment powers over the shares set forth in the Beneficial Ownership Table. None of the shares reported are pledged as security.
 
 
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Notes to Beneficial Ownership Table
 
  (1)   Amount shown represents shares held jointly with the Director’s spouse, as to which the Director shares voting and investment powers.
 
  (2)   Includes 14,000 shares that Mrs. Cohen has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options.
 
  (3)   Includes 55,200 shares that Mr. Graves has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options.
 
  (4)   Amount shown represents 14,823 shares held by his spouse, as to which Mr. Greenwald has no voting or investment power.
 
  (5)   Includes 26,735 shares that Mrs. Hancock has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options. Also includes 14,010 shares held jointly with her spouse, as to which Mrs. Hancock shares voting and investment powers, and 400 shares held jointly by Mrs. Hancock’s spouse and step-daughter as to which Mrs. Hancock has no voting or investment power.
 
  (6)   Includes 14,000 shares that Mr. Ludwig has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options and 9,391 shares held jointly with his spouse, as to which Mr. Ludwig shares voting and investment powers.
 
  (7)   Includes 35,068 shares that Dr. Newhouse has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options and 2,000 shares held jointly with his spouse, as to which Dr. Newhouse shares voting and investment powers.
 
  (8)   Includes 1,500,827 shares that Mr. Bertolini has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options and SARs; and 125,485 shares held by Mr. Bertolini.
 
  (9)   Includes 400,534 shares that Mr. Casazza has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options and SARs; 56,961 shares held by Mr. Casazza; 836 shares held in a custodial account for his children for which Mr. Casazza is the custodian and has sole voting and investment power; and 3,750 shares held under the 401(k) Plan by Mr. Casazza.
 
  (10)  Includes 170,473 shares that Ms. McCarthy has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options and SARs; 9,665 shares held by Ms. McCarthy; and 1,155 shares held under the 401(k) Plan by Ms. McCarthy.
 
  (11)  Includes 142,408 shares that Dr. Reisman has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options and SARs; and 49,585 shares held in a 2009 Grantor Retained Annuity Trust of which Dr. Reisman is the sole trustee.
 
  (12)  Includes 571,682 shares that Mr. Zubretsky has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of SARs; and 90,451 shares held by Mr. Zubretsky.
 
  (13)  Includes 5,212,470 shares that Mr. Williams has the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options and SARs. Also includes 184,847 shares held by Mr. Williams; 114,466 shares held in a family trust of which Mr. Williams and his spouse are the sole trustees and beneficiaries; 3,948 shares held in a 2002 Grantor Retained Annuity Trust of which Mr. Williams is the sole trustee; and 37,586 shares held in a 2008 Grantor Retained Annuity Trust of which Mr. Williams is the sole trustee.
 
  (14)  Directors and executive officers as a group have sole voting and investment power over 653,531 shares, share voting and investment power with respect to 154,990 shares (including 4,905 shares held under the 401(k) Plan) and have no voting or investment power over 15,223 shares. Also includes 8,143,397 shares that Directors and executive officers have the right to acquire currently or within 60 days of March 18, 2011, upon the exercise of stock options and SARs.
 
  (15)  Common stock equivalents include unvested stock units, RSUs, Performance Stock Units (“PSUs”) and Market Stock Units (“MSUs”) that do not earn dividend equivalents and have no voting rights.
 
 
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  Common stock equivalents also include vested stock units that earn dividend equivalents but do not have voting rights.
 
  (16)  Includes stock units issued under the Director Plan and plans of Aetna’s predecessors, as applicable. Certain of the stock units are not vested — see “Stock Unit and Restricted Stock Unit Awards” beginning on page 35. Stock units track the value of the Common Stock and vested stock units earn dividend equivalents that may be reinvested, but do not have voting rights. Also includes RSUs granted to each nonmanagement Director under the Director Plan which are unvested, or vested but not yet payable, and are payable in shares of the Common Stock.
 
  (17)  Includes 114,191 RSUs that vest on February 13, 2012. The RSUs do not earn dividend equivalents and have no voting rights. Also includes 113,014 PSUs and 21,704 PSUs that will vest on February 8, 2012 and November 29, 2012, respectively. Also includes 58,955 PSUs and 132,149 MSUs that may vest on December 7, 2012, to the extent the Compensation Committee determines that the Company has met the applicable performance goal set at the time of grant. Also includes 113,738 MSUs that will vest on February 8, 2012 based on the average closing price of the Common Stock for the final 30 trading days of the applicable vesting period.
 
  (18)  Includes 13,206 RSUs that vest on March 10, 2012. The RSUs do not earn dividend equivalents and have no voting rights. Also includes 43,152 PSUs that vest on February 8, 2012. Also includes 17,088 PSUs and 38,302 MSUs that may vest on December 7, 2012, to the extent the Compensation Committee determines that the Company has met the applicable performance goal set at the time of grant. Also includes 43,427 MSUs that will vest on February 8, 2012 based on the average closing price of the Common Stock for the final 30 trading days of the applicable vesting period.
 
  (19)  Includes 28,594 vested deferred stock units that earn dividend equivalents that are reinvested in stock units. Stock units do not have voting rights. Also includes 7,106 RSUs and 32,787 RSUs that vest on April 25, 2011 and December 2, 2013, respectively. The RSUs do not earn dividend equivalents and have no voting rights. Also includes 53,426 PSUs that vest on February 8, 2012. Also includes 22,376 PSUs and 50,157 MSUs that may vest on December 7, 2012, to the extent the Compensation Committee determines that the Company has met the applicable performance goal set at the time of the grant. Also includes 53,767 MSUs that will vest on February 8, 2012 based on the average closing price of the Common Stock for the final 30 trading days of the applicable vesting period.
 
  (20)  Includes 32,878 PSUs that vest on February 8, 2012. Also includes 13,019 PSUs and 29,182 MSUs that may vest on December 7, 2012, to the extent the Compensation Committee determines that the Company has met the applicable performance goal set at the time of grant. Also includes 33,088 MSUs that will vest on February 8, 2012 based on the average closing price of the Common Stock for the final 30 trading days of the applicable vesting period.
 
  (21)  Includes 78,896 RSUs and 65,574 RSUs that vest on February 13, 2012 and December 2, 2013, respectively. The RSUs do not earn dividend equivalents and have no voting rights. Also includes 78,084 PSUs that vest on February 8, 2012. Also includes 34,988 PSUs and 78,427 MSUs that may vest on December 7, 2012, to the extent the Compensation Committee determines that the Company has met the applicable performance goal set at the time of grant. Also includes 78,582 MSUs that will vest on February 8, 2012 based on the average closing price of the Common Stock for the final 30 trading days of the applicable vesting period.
 
  (22)  Includes 606,517 vested deferred stock units that earn dividend equivalents that are reinvested in stock units. Stock units do not have voting rights. Also includes 294,522 PSUs that vest on February 8, 2012. Also includes 295,421 MSUs that will vest on February 8, 2012, based on the average closing price of the Common Stock for the final 30 trading days of the vesting period.
 
  (23)  Includes 514,121 stock units issued to Directors; 66,816 unvested RSUs, or vested RSUs that are not yet payable, issued to Directors; 635,111 vested deferred stock units issued to Mr. Williams and Ms. McCarthy; and 2,041,206 unvested RSUs, MSUs and PSUs issued to executive officers as a group.
 
 
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Compensation Discussion and Analysis
 
I.      2010 — A Year of Leadership Transition and Strong Operating Performance
 
A.      Leadership Transition
 
After more than 10 years of service with the Company, Ronald A. Williams announced his decision to retire effective April, 2011. In November 2010, the Board of Directors appointed Mark T. Bertolini the Company’s CEO and President, and on April 8, 2011, Mr. Bertolini succeeded Mr. Williams as Chairman. This leadership change was the result of a disciplined and comprehensive succession process led by the Board of Directors and the Compensation Committee. This process allowed for the appointment of an internal successor, facilitating a smooth transition of this key leadership role.
 
B.      Company 2010 Performance and Related Impact on Compensation Decisions
 
The Company reported strong financial results for 2010, exceeding the financial targets it established at the start of the year. On February 4, 2011, the Company reported:
 
  •  Strong Operating Earnings per Share.  Aetna reported 2010 operating earnings per share of $3.68 (34% increase over 2009), reflecting strong operating fundamentals across all aspects of our business.
 
  •  Improved Pre-Tax Operating Margin.  Aetna reported a 2010 pre-tax operating margin of 8% (160 basis point improvement over 2009), achieving its short term 2010 goal of attaining a high single digit pre-tax operating margin.
 
  •  Increase to Dividend.  Aetna announced a transition to a quarterly dividend payment cycle and declared the first quarterly dividend of $.15 per share, reflecting our confidence in our strategy and a continued commitment to enhancing total return for our shareholders. Previously, the Company paid a $.04 per share annual dividend.
 
     
       Operating Earnings Per Share
         Pre-Tax Operating Margin
(BAR CHART)   (BAR CHART)
 
The Company also reported several strategic accomplishments, including: entry into a long-term pharmacy benefit management agreement with CVS/Caremark Corporation; the announcement of the acquisition of Medicity Inc., a leading provider of health information exchange software and services; and the expansion of our Medicaid business.
 
The Company’s operating results were reflected in the executive pay decisions as follows:
 
  •  Annual Bonus Payments Above Target.  Our annual bonus plan (the “ABP”), which is weighted 80% on annual financial metrics, was funded at 166.8% of target.
 
  •  2010-2011 Equity Incentive Program/Performance Goals Achieved.  The one-year performance goals for the 2010-2011 Performance Stock Unit (“PSU”) and Market Stock Unit (“MSU”) programs were achieved as more fully described beginning on page 50. These awards are not payable to executives until February 2012.
 
In light of longer-term operating results over the 2009-2010 period, the following additional pay decisions were made:
 
  •  No Payout Under 2009-2010 PSU Program.  The PSUs granted for the 2009-2010 performance period were cancelled without payment because the Compensation Committee determined that the two-year operating earnings per share performance goal for that award was not met.
 
 
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  •  No Base Salary Increase.  Other than promotional increases in connection with job changes, our Named Executive Officers did not receive base salary increases for 2010.
 
Despite the Company’s strong operating results during 2010, our stock performance has continued to be negatively impacted by the uncertainties of health care reform. As a result, almost all stock options and SARs awarded from 2005 through 2010 had no intrinsic value on December 31, 2010, because the grant prices exceeded Aetna’s stock price on that date. Through March 18, 2011, our stock price has increased 15% since the start of the year, however, 55% of stock options and SARs awarded from 2005 through 2010 continue to have no intrinsic value as of that date.
 
2010 was a year that brought historic change to the health care industry. Aetna has been a leader throughout the health care reform process, and we continue to work closely with the industry and with federal and state governments toward thoughtful health policy change to address affordability and improve access to quality health care. Solid financial results are not only important to our shareholders, they enable us to continue to reinvest in the health care system, furthering our goal of empowering people to live healthier lives.
 
C.      2010 and 2011 Compensation Plan Design Changes
 
In connection with the leadership change, the Compensation Committee, with the assistance of Cook, its independent compensation consultant, reviewed the Company’s executive compensation programs during 2010. As a result of this review, the Compensation Committee approved the following program changes:
 
  •  A new compensation peer group.  Following Aetna’s Annual Meeting of Shareholders in 2010, the Compensation Committee modified the select cross-industry peer group used for compensation comparisons (the “Cross-Industry Comparison Group”) to include only companies that have revenues between .5 and 2 times Aetna’s revenue. This change is intended to better align compensation decisions with the compensation of similarly sized companies with whom we compete for talent.
 
  •  Substantial revision to CEO target compensation level and pay mix.  In setting the 2011 target compensation for Mr. Bertolini, the Compensation Committee reduced the total target compensation opportunity for the CEO position to approximately the 50th percentile of the revised compensation peer groups. This compares to the targeting of pay at approximately the 75th percentile for the preceding CEO. The Compensation Committee also adjusted the mix of pay for Mr. Bertolini so that a greater percentage of Mr. Bertolini’s compensation is tied to attaining annual financial goals, as more fully described beginning on page 44.
 
  •  Elimination of SARs.  The Compensation Committee decided to replace SARs with MSUs as part of our long-term incentive program for executives, including the Named Executive Officers, beginning in 2010. The MSUs, which are more fully described beginning on page 50, have a two-year vesting period, and the number of MSUs that vest is determined based on stock price performance over that time frame. MSUs granted to Named Executive Officers also require the Company to achieve a one-year operating earnings per share and/or revenue goal. This change is designed to increase the linkage between executive pay and Company financial and stock price performance.
 
  •  Elimination of change-in-control tax gross-up.  In connection with the revisions to Mr. Bertolini’s and Mr. Williams’ employment agreements during 2010, the Company eliminated the excise tax gross-up for severance payments received from the Company in connection with a change in control. The Company does not expect to enter into any new arrangements that include excise tax gross up payments in the future.
 
 
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In addition, the following other program changes were made to Company benefit programs to align these programs more closely with our health care industry competitors:
 
  •  Pension plan freeze.  Effective January 1, 2011, the Company froze future accruals under the Company’s noncontributory, defined benefit pension plan (the “Pension Plan”). The freeze means that Company employees, including the Named Executive Officers, will not earn any new pension credits after January 1, 2011. Benefits employees earned before the freeze will be paid to employees under the terms of the Pension Plan when employees terminate employment. The Company had previously frozen accruals under the Company’s supplemental defined benefit pension plan (the “Supplemental Pension Plan”) in 2007.
 
  •  401(k) plan improvements.  As a result of the Pension Plan freeze, the 401(k) Plan is now the primary retirement program for employees. Effective October 4, 2010, Aetna enhanced the 401(k) Plan by: (a) increasing the company match to 100% on the first 6% of eligible contributions; (b) making participating employees eligible for the matching contribution immediately upon joining the 401(k) Plan; and (c) automatically enrolling newly hired employees into the 401(k) Plan immediately following their date of hire. The Company has a non-tax qualified supplemental 401(k) plan (the “Supplemental 401(k) Plan”) for highly compensated employees that permits employee contributions above Code limits applicable to the 401(k) Plan. Aetna does not match employee contributions under the Supplemental 401(k) Plan.
 
II.      Objectives of Our Executive Compensation Program
 
An understanding of our executive compensation program begins with the program objectives. Although we made changes to our program for 2010, our objectives remain the same. These include:
 
  •  Aligning the interests of our executives and shareholders.  We seek to align the interests of our executives with those of our shareholders through equity-based compensation and share ownership guidelines.
 
  •  Linking rewards to performance.  We seek to implement a pay-for-performance philosophy by tying a significant portion of our executives’ compensation to their achievement of financial and other goals that are linked to the Company’s business strategy and each executive’s contributions towards the achievement of those goals.
 
  •  Offering competitive compensation.  We seek to offer an executive compensation program that is competitive and that helps us attract, motivate and retain top performing executives in the highly competitive global market for health care talent.
 
We continue to believe that a significant portion of executive compensation should be variable and based on defined performance goals and/or stock price change (i.e., “at risk”), which our program delivers in the form of equity and other performance-based awards.
 
 
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The chart below shows the 2010 mix of target compensation opportunity for Mr. Williams and for the other Named Executive Officers (including Mr. Bertolini) as a group. In addition, Mr. Bertolini’s 2011 target compensation mix is also shown.
 
COMPENSATION MIX AT TARGET
 
(BAR CHART)
 
We believe our emphasis on equity-based compensation aligns the interests of our executives with those of our shareholders.
 
III.      Summary of Chief Executive Officer Compensation Decisions
 
Mr. Bertolini’s Compensation
 
                         
 
          2010
    2011 TARGET
 
    2010
    (ROLE AS CEO AND
    (ROLE AS CHAIRMAN,
 
    (ROLE AS PRESIDENT)     PRESIDENT)     CEO AND PRESIDENT)  
 
 
Salary
    $936,000 (1)     $1,000,000 (2)     No change  
Target Bonus
    120% of base salary       No change       300% of base salary  
Actual Bonus
    $1,894,846
166.8% of target
      No change
 
      TBD
 
 
Long-term Incentive Opportunity
    $5,500,035 (3)     $327,296 (4)     $7,245,500 (5)
2009-2010 PSU Payout(6)
    $0       $0       NA  
(1)  Annual salary rate in effect on 1/1/2010.
 
(2)  Annual salary rate effective on November 29, 2010, the date of Mr. Bertolini’s promotion to CEO.
 
(3)  Reflects the grant date fair value of PSUs ($1,650,004) and MSUs ($3,850,031).
 
(4)  Reflects the grant date fair value of additional PSUs granted effective November 29, 2010, in connection with Mr. Bertolini’s promotion to CEO.
 
(5)  Reflects the estimated grant date fair value of PSUs ($2,173,650) and MSUs ($5,071,850) on the date the awards were approved by the Compensation Committee.
 
(6)  The previously reported grant date fair value for Mr. Bertolini’s 2009-2010 PSU grant was $1,650,004.
 
Below is a summary of the Compensation Committee’s compensation decisions for Mr. Bertolini:
 
  •  2010 Base Salary.  Concurrent with his appointment as CEO, Mr. Bertolini’s salary was set at $1,000,000 to more closely align Mr. Bertolini’s salary with the CEOs of the comparison groups of companies used to review Mr. Bertolini’s compensation. This annual base salary is slightly below the
 
 
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  median base salary of the CEOs of the five health care companies that we consider our closest competitors (the “Health Care Comparison Group” and together with the Cross-Industry Comparison Group, the “Comparison Groups”).
 
  •  2010 Annual Bonus.  Mr. Bertolini’s annual bonus for 2010 was determined primarily based on Company performance against the ABP goals described in detail beginning on page 47. The Compensation Committee also conducted a subjective review of Mr. Bertolini’s individual performance. The individual performance factors considered by the Compensation Committee and the Board consisted of strategic accomplishments (including new businesses and products) and business operations accomplishments (including the successful implementation of a new operating model; international expansion; and entry into a long-term pharmacy benefit management agreement with CVS/Caremark Corporation). The Compensation Committee also considered that Mr. Bertolini has continued to serve as a positive and constructive voice in the national dialogue on health care reform and has continued to build effective relations with coalitions, associations and other stakeholders. The Compensation Committee further considered that Mr. Bertolini continued to steward The Aetna Way, our core values and business ethics program, and continued to evolve the Company’s talent management and succession processes.
 
  •  2010-2011 Long-Term Incentive Opportunity.  The Compensation Committee set Mr. Bertolini’s 2010-2011 long-term opportunity at $5,827,331. This amount includes a grant made at the start of the year and an additional grant made in connection with Mr. Bertolini’s promotion to CEO in November 2010.
 
  •  No 2009-2010 PSU Payout.  The Compensation Committee determined that the two-year performance goal for the 2009-2010 PSU program was not met. As a result, the 2009-2010 PSU award was cancelled without payment. The previously reported grant date fair value of this award was $1,650,004.
 
  •  2011 Compensation Opportunity.  In connection with Mr. Bertolini’s appointment as CEO, the Compensation Committee restructured Mr. Bertolini’s 2011 compensation opportunity as follows:
 
  •  Mr. Bertolini’s 2011 total direct compensation opportunity ($11,245,500) was established at approximately the 50th percentile of the Comparison Groups (just below the 50th percentile of the Cross-Industry Comparison Group and just above 50th percentile of the Health Care Comparison Group). This pay target was a substantial reduction from the pay target of Mr. Williams (75th percentile/$17,050,000).
 
  •  Mr. Bertolini’s 2011 annual bonus opportunity was set at 300% of his base salary. Of this amount, 60% is expected to be paid in an equity-based vehicle which is expected to vest over three years following a review of the Company’s 2011 performance. The increase to Mr. Bertolini’s annual bonus opportunity and accompanying reduction in long-term grant value (as compared with the preceding CEO) were made to more directly align Mr. Bertolini’s total direct pay opportunity with the Company’s annual performance while continuing the focus on creation of long-term shareholder value.
 
  •  To offset the increase in annual bonus opportunity, Mr. Bertolini’s 2011-2012 long-term equity incentive opportunity was reduced to 64% of his total direct compensation opportunity. The 2011-2012 long-term equity incentive awards will pay at target levels only if the established performance goals are met.
 
 
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IV.      2010 Compensation Policies
 
What are the elements of the Company’s executive compensation program?
 
The 2010 compensation program for Named Executive Officers consisted of the following components:
 
         
Component   Description   Purpose
 
Base Salary
  Fixed cash compensation based on the executive’s past and potential future performance, scope of responsibilities, experience and competitive market pay practices.   Provide a fixed, baseline level of compensation that is not contingent upon Company performance.
         
Performance-Based Annual Bonus
  Cash payment tied to meeting annual performance goals set for the fiscal year that are tied to the Company’s annual business plan and individual performance.   Motivate executives to achieve superior annual financial and operational performance.
Long-Term Equity Incentives:
       
•   MSUs
  Performance-based stock units earned based on the achievement of a one-year performance threshold and which pay out based on stock price change over a two-year period. MSUs will vest in a single installment at the end of a two-year vesting period.   Align compensation to increases in Aetna’s stock price and the creation of shareholder value.
         
•   PSUs
  Performance-based stock units which pay out, if at all, based on the Company’s performance against a one-year financial goal. PSUs will vest, if at all, in a single installment at the end of a two-year vesting period.   Align achievement of specific internal financial performance objectives with the creation of shareholder value, increase executive stock ownership and provide retention incentives.
         
•   RSUs
  Time-vested stock units.   Align compensation with changes in Aetna’s stock price and the creation of shareholder value, and strengthen retention, including during leadership transitions.
 
The Company also provides health, welfare and retirement benefits to its executives and other employees generally.
 
How are the total cash and equity compensation amounts determined?
 
Our compensation program, in general, is designed to set total cash and equity compensation opportunity (considered as base salary, performance-based annual bonus and long-term incentive equity awards) for senior executives at an amount that is competitively reasonable and appropriate for our business needs and circumstances. In making compensation decisions, the Compensation Committee reviews the cash and equity compensation opportunities available to similarly positioned executives at companies in a comparison group or groups selected for each position. The Compensation Committee also considers the mix of compensation and structures target compensation opportunities to reflect the percent of pay “at risk” in the form of equity or other performance-based awards.
 
 
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The program is designed, in general, to deliver above median total compensation for above median performance and below median total compensation for below median performance. For executives with compensation opportunities that are more highly variable or focused on longer-term incentives, including the Named Executive Officers, total cash and equity compensation opportunity may be above the median, but “at risk” amounts are paid only if performance goals are achieved or exceeded. In setting total compensation opportunity, the Compensation Committee does not, on a formulaic basis, set target compensation opportunity at the precise median of the Comparison Groups. Instead, the Compensation Committee uses the Comparison Group information as a reference point and uses the data as a guide to make what is ultimately a subjective decision that balances (i) a competitive level of compensation for a position; (ii) executive experience and scope of responsibility; (iii) individual performance; (iv) percent of pay “at risk”; and (v) retention. There is not a pre-defined formula that determines which of these factors is more or less important, and the emphasis placed on a specific factor may vary among executive officers and will reflect market conditions and business needs at the time the pay decision is made. For 2010, the Named Executive Officers’ total compensation opportunity ranged from the median to above the 75th percentile because these officers tend to have more of their pay opportunity “at risk” based on Company performance.
 
For the Named Executive Officers, the Compensation Committee reviews the compensation of the officers of both Comparison Groups. The Compensation Committee also reviews third-party compensation surveys. The companies that make up each Comparison Group and the reasons they were selected are listed beginning on page 54. The third party compensation surveys are purchased from outside compensation vendors selected by our human resources department, and the data provided by the vendors is reviewed by Cook. The data presented to the Compensation Committee includes a regression analysis (market compensation data adjusted to account for company size based on revenue) where available. The compensation of Named Executive Officers is compared across the Named Executive Officer group and with the compensation of other senior executives of the Company for internal pay relativity purposes. The Compensation Committee, however, has not established a specific pay relativity percentage.
 
How are base salaries for executive officers determined?
 
In making annual base salary determinations, the Compensation Committee considers the terms of any employment agreement with the executive, the recommendations of the CEO (as to other executives), salary paid to persons in comparable positions in the executive’s Comparison Groups, the executive’s experience and scope of responsibility, and a subjective assessment of the executive’s individual past and potential future contribution to Company results. Base salary, as a percent of total compensation, also differs based on the executive’s position and function. Although the Compensation Committee has not established a specific ratio of base salary to total compensation, in general, executives with the highest level and broadest scope of responsibility have the lowest percentage of their compensation fixed as salary and have the highest percentage of their compensation subject to performance-based standards (performance-based annual bonus and long-term incentives).
 
As described beginning on page 44, concurrent with his appointment as CEO and President, Mr. Bertolini’s salary was increased from $936,000 to $1,000,000 to more closely align his base salary to the CEOs of the Health Care Comparison Group and to Mr. Williams. In connection with his promotion to Senior Executive Vice President and Chief Financial Officer, the Compensation Committee increased Joseph M. Zubretsky’s base salary from $728,000 to $800,000. In addition, in connection with certain responsibility changes for Margaret M. McCarthy, her base salary was increased from $520,000 to $600,000. These increases in base salary were made to reflect the increased responsibilities undertaken by the Named Executive Officer and to align their compensation with the Comparison Groups. The Compensation Committee did not increase the base salary of any other Named Executive Officer in 2010.
 
How are annual performance-based bonuses determined?
 
In 2010, annual bonuses were paid in cash. All executive officers and managers are eligible to participate in the ABP. The Compensation Committee, after consulting with the Board, establishes specific financial and
 
 
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operational goals at the beginning of each performance year, and annual bonus funding is linked directly to the achievement of these annual goals. Following the completion of the performance year, the Compensation Committee assesses performance against the pre-established performance goals to determine bonus funding for the year. The ABP goals, described in more detail below, are directly derived from our strategic and business operating plan approved by the Board. These goals, which measure annual results, require performance to be balanced between delivering financial results and achieving internal and external constituent goals. The Company believes it is important to consider these non-financial constituent goals, which have a 20% ABP weighting, because they help keep a focus on our longer-term success and the quality of our brand and reputation, rather than strict annual financial results.
 
Under the ABP, if all of the goals are met at the target level in the aggregate, then up to 100% of the target bonus pool is funded. If the goals are exceeded in the aggregate, by a sufficient margin, then up to a maximum of 200% of the target bonus pool is funded. At the threshold performance level, 25% of the target bonus pool is funded. For executive officers subject to Section 162(m) of the Code, their annual bonus cannot exceed $3 million.
 
For 2010, bonus pool funding under the ABP was determined as set forth below:
 
                               
            Goal/Target
    Actual
    Performance
    Weighted
Weight     Measure     Performance     Performance     Level     Points
80%
    Financial Performance                        
                               
45%
    Adjusted Operating Earnings Per Share(1)     $3.00     Above Maximum     Maximum     90
                               
25%
    Underwriting Margin(2)     $7,575 million     Above Maximum     Maximum     50
                               
10%
    G&A–% of Revenue(3)     14.75%     14.84%     Below Target     9.2
                               
20%
    Constituent Index Performance                        
                               
8%
    Member(4)     100%     112.5%     Above Target     8.6
                               
4%
    External(5)     100%     96%     Below Target     3.5
                               
8%
    Internal(6)     100%     95.5%     Below Target     5.5
                               
Total
                            166.8
                               
 
(1) Adjusted Operating Earnings Per Share (“EPS”) is a non-GAAP measure. For purposes of the ABP, the EPS calculation is adjusted to exclude the impact of pension expense/income. EPS also excludes net realized capital gains and losses and other items, if any, from net income.
 
(2) Underwriting margin is a non-GAAP measure. Underwriting margin is calculated by subtracting health care costs and current and future benefits from total premiums and fees and other revenue, excluding other items, if any.
 
(3) This goal measures general and administrative expenses (“G&A”) as a percentage of revenue. G&A as a percentage of revenue is a non-GAAP measure. It excludes net realized capital gains from total revenue, and the other items and selling expenses from total operating expenses, as described in our Fourth Quarter and Full Year 2010 Earnings Press Release dated February 4, 2011. In addition, the calculation of G&A as a percentage of revenue also excludes certain performance-based compensation.
 
(4) This goal measures member health quality and satisfaction determined through external national and regional benchmarks (HEDIS and Quality Compass results) and a Company sponsored survey of consumer perceptions across the industry.
 
(5) This goal measures external constituent satisfaction determined through a Company sponsored survey of plan sponsors, providers and brokers. The target was aggressive in light of changes to the Company’s operating model and 2010 goal to attain a high single digit operating margin.
 
(6) This goal measures employee engagement determined through responses to the Company’s all-employee survey as well as performance against diversity initiatives for employees and supplier groups.
 
The Company reported strong operating earnings and underwriting margin for 2010, exceeding the goals established at the start of the year. As a result of this performance, after applying the weightings noted above, the Compensation Committee set the 2010 ABP bonus pool funding at 166.8% of target. Within this pool funding, the Compensation Committee set actual bonus amounts after conducting a subjective review of each Named Executive Officer’s individual performance for the year and considering the
 
 
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recommendations of Mr. Bertolini (as to executives other than himself or Mr. Williams). In determining the annual bonuses for Mr. Bertolini and Mr. Williams, the Compensation Committee consulted with the nonmanagement members of the Board. The factors considered in determining individual bonus amounts for the Named Executive Officers are set forth below.
 
                   
      2010 Annual
           
      Bonus Target
           
      as a Percent of
    2010 Payment as a
     
 Named Executive Officer     Base Salary     Percent of Target     Discretionary Factors
Mr. Bertolini
    120%     166.8%    
• Described on page 45.
                   
Mr. Casazza
    80%     168.1%    
• Effective deployment of legal services

• Litigation results

• Compliance initiatives

• Enterprise and Pro Bono leadership
                   
Ms. McCarthy
    90%     156.8%    
• Results of business units managed

• Delivery of technology portfolio

• Change leadership

• Talent management in IT organization
                   
Dr. Reisman
    80%     222.0%    
• Success of total quality management program

• Industry leadership in addressing health care disparities

• NCQA rating results

• Talent development for Company clinicians
                   
Mr. Zubretsky
    100%     169.3%    
• Leadership on enterprise strategy

• Leadership in developing financial strategy in response to health care reform

• Development of innovative business solutions through enhanced M&A activity

• Financial and capital management
                   
Mr. Williams
    150%     166.8%    
• Leadership of the Board of Directors and succession planning/transition

• Development and communication of long-term strategic plan

• Profitable growth through implementation of new operating model

• Strategic accomplishments including entry into long-term pharmacy benefit management contract

• Strengthened critical partnerships and positioning Aetna as a thought leader on health care reform
                   
 
 
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How are long-term incentive equity awards (MSUs and PSUs) determined?
 
In 2010, the Company’s executive long-term incentive equity award program was delivered in the form of MSUs and PSUs. The objective of the MSU and PSU awards is to advance the longer-term interests of the Company and our shareholders by directly aligning executive compensation with increases in our stock price and to incent executives to meet the specified MSU and PSU performance goals. These awards complement cash incentives tied to annual performance by providing incentives for executives to increase earnings and shareholder value over time.
 
As described above, the amount of individual long-term equity awards (MSUs and PSUs) is determined so that, in general, when combined with base salary and annual bonus, an executive’s total target compensation opportunity is set to approximate the compensation paid to similarly positioned executives at companies in the executive’s Comparison Groups. In 2010, the theoretical value of the long-term incentive equity awards was delivered 70% in MSUs and 30% in PSUs. This split aligns the majority (70%) of the long-term incentive value directly with shareholder interests of increasing the value of our stock, and reduces the value of the award if the stock price declines. The remaining 30% of the long-term incentive value is also tied to the value of our stock and the attainment of specific financial operating goals. The MSU and PSU grants made in 2010 to the Named Executive Officers vest over a two-year period only if the one-year performance goal set at the time of grant is met. The MSU and PSU awards are settled in Common Stock, net of applicable withholding taxes, in order to reduce shareholder dilution resulting from the awards. The Company currently does not pay dividend equivalents on MSUs, PSUs or on any unvested RSUs.
 
What is the PSU performance goal and why was it selected?
 
  •  2009-2010 PSU Program.  The 2009-2010 PSU program required the Company to attain 8% compound annual operating earnings per share growth over the period 2009-2010 to pay out at 100%. This goal was selected because at the time it was set, it represented the Company’s aggressive goal for two-year operating earnings per share growth. The Compensation Committee determined that the Company did not meet the goal. As a result, the 2009-2010 PSU awards were cancelled without payment.
 
  •  2010-2011 PSU Program.  The 2010-2011 PSU program was designed to vest at 100% if the Company attained a one year adjusted operating earnings per share goal of $3.00 per share. The goal was selected because, at the time it was set, it represented the Company’s operating earnings per share goal for 2010. The PSU performance measurement period was defined as one year (calendar year 2010), with final vesting to occur at the end of two years if goals were achieved, to reinforce the importance of returning to targeted margin levels while simultaneously controlling costs. The award also includes a service-based vesting element to increase retention. As noted above, the Company significantly exceeded its 2010 operating earnings per share goal and, as a result, on January 20, 2011, the Compensation Committee determined that the 2010-2011 PSUs will vest at the maximum level (200%). For the PSUs to vest at this level, an executive must continue to provide services to the Company through February 8, 2012.
 
What is the MSU performance goal and why was it selected?
 
In 2010, the Compensation Committee replaced SARs with MSUs as part of our long-term incentive program for executive officers. The MSUs are designed to vest primarily based on the change in Aetna’s stock price between the grant date and the average closing price of the Common Stock for the final 30 trading days of the two-year vesting period, which ends February 8, 2012. The number of MSUs that will vest is formulaically determined based on the percentage change in the price of the Common Stock, with 150% of the units awarded being the maximum number of units eligible to vest if the Common Stock price increases 50% from the closing price on the date of grant. In addition, in order for the units to vest, the Company had to achieve a one-year operating earnings and/or revenue goal of at least $1,162 million and $29,700 million, respectively, for 2010. On January 20, 2011, the Compensation Committee determined that the 2010 MSU performance goal had been achieved. As a result, the number of vested MSUs will be
 
 
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determined based on the average closing price of the Common Stock for the final 30 trading days ending on and including February 8, 2012.
 
Does the Compensation Committee consider prior equity grants when making compensation decisions?
 
In making individual long-term incentive equity award decisions, the Compensation Committee does not take into account prior equity grants or amounts realized on the exercise or vesting of prior equity grants in determining the number of units to be granted. The Company’s philosophy is to pay an annualized market value for the executive’s position, sized according to the performance level of the individual in the position. The Compensation Committee does review prior equity grants of executives in evaluating the overall design, timing and size of the long-term incentive program. In addition, in assessing the recruitment/retention risk for executives, the Compensation Committee considers the value of unvested equity awards.
 
Does the Company grant special equity awards?
 
On occasion, the Compensation Committee makes special equity grants in the form of RSUs to executives and other senior officers to assure retention of the talent necessary to manage the Company successfully in the future. In connection with the Company’s leadership transition, the Compensation Committee approved special RSU grants to Mr. Zubretsky ($2,000,000) and Ms. McCarthy ($1,000,000). These RSUs will vest in a single installment three years from the grant date provided the executive remains employed by the Company at that time. To increase the retention value of these awards, they do not include a provision that permits partial vesting upon retirement.
 
What is the Company’s policy on the grant date of equity awards?
 
As was the case with equity awards granted in prior years, the effective date of the annual long-term incentive equity grant is the stock market trading day after our annual earnings are announced, and the grant price of any award is the closing price of our Common Stock on that day. Our annual earnings are announced prior to the opening of trading on the NYSE. The Compensation Committee has selected this timing so that the award value reflects the current market value of our Common Stock, incorporating our most recent full-year earnings information and outlook.
 
The Compensation Committee also makes grants during the year, primarily in connection with hiring and promotions. Under our policy, these off-cycle grants are generally effective quarterly on the 10th day of the first month of each quarter, with the exception of retention or promotion grants, which are generally effective on the date of the grant. The grant price of an option or a SAR is never less than the closing price of our Common Stock on the date of grant.
 
What are the health, welfare and pension benefits offered?
 
To attract and retain employees at all levels, we offer a subsidized health and welfare benefits program that includes medical, dental, life, accident, disability, vacation and severance benefits. Our subsidy for employee health benefits is graduated so that executives pay a higher contribution than more moderately paid employees.
 
In addition, we offer a tax-qualified 401(k) Plan and the Pension Plan. The 401(k) Plan is available to substantially all of our U.S. based employees, including the Named Executive Officers. We also offer the Supplemental 401(k) Plan to provide benefits above Code contribution limits. There is no Aetna matching contribution under the Supplemental 401(k) Plan. As discussed on page 43, the Pension Plan was frozen as of January 1, 2011. The Company’s Supplemental Pension Plan was previously frozen in January 2007. Interest continues to accrue on outstanding pension cash balance accruals. In some instances, special pension arrangements have been made in order to attract and/or retain key executives. Mr. Williams is the only Named Executive Officer with a contractual arrangement for an enhanced pension benefit. Mr. Williams’ pension enhancement was negotiated as a recruitment incentive when Mr. Williams was hired in 2001, and his pension enhancement ended in 2010.
 
 
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Does the Company have an Employee Stock Purchase Plan?
 
Our tax-qualified employee stock purchase plan is available to substantially all employees, including the Named Executive Officers. This program allows our employees to buy our Common Stock at a 5% discount to the market price on the purchase date (up to a maximum of $25,000 per year). We offer this program because we believe it is important for all employees to focus on increasing the value of our Common Stock and to have an opportunity to share in our success. Mr. Williams participated in this program in 2010.
 
Does the Company provide other compensation to its executives?
 
The Company provides only limited other compensation to the Named Executive Officers (see the All Other Compensation table in footnote 10 on page 58). The largest item shown in the All Other Compensation table is personal use of corporate aircraft. In the interest of security, with certain exceptions, the Company requires that the CEO use corporate aircraft for personal travel whenever use of the aircraft is not required for a business purpose. Other senior executives are also permitted to use corporate aircraft for personal travel at the discretion of the CEO. The Compensation Committee believes this practice is reasonable and appropriate given security concerns and the demands put on our Named Executive Officers’ time. The Company does not provide any tax gross-ups related to other compensation.
 
What is the Company’s policy on Internal Revenue Code Section 162(m)?
 
Currently, Section 162(m) of the Code limits the tax deductibility of compensation in excess of $1 million paid to certain executive officers, unless the payments are made under plans that satisfy the technical requirements of the Code. The Compensation Committee believes that pay over $1 million is, in some circumstances, necessary to attract and retain executives in a competitive marketplace. Annual bonuses, MSUs and PSUs are designed so that the compensation paid will be tax deductible by the Company. In addition, in situations where we pay a base salary amount above $1 million, the Compensation Committee has mandated that the amount in excess of $1 million be deferred by the executive to preserve the tax deductibility of the payment. The Compensation Committee believes that there are circumstances under which it is appropriate for the Compensation Committee not to require deductibility to maintain flexibility or to continue to pay competitive compensation.
 
Do executives have to meet stock ownership requirements?
 
The CEO and other senior executives are subject to minimum stock ownership requirements. The ownership requirements are based on the executive’s pay opportunity and position within the Company. The ownership levels (which include shares owned and vested stock units but not stock options, SARs or unvested MSUs or PSUs) are as follows:
 
Stock Ownership as a Multiple of Base Salary
 
     
Position   Multiple of Salary
 
 
Chief Executive Officer
  5x
Other Named Executive Officers
  3x
Other Executives
  1/2x to 2x
 
 
 
In January, 2010 the Compensation Committee modified the executive stock ownership program. Executives who do not meet their individual ownership requirement at the time an award vests or is exercised will be required to retain at least thirty-five percent (35%) of the after-tax equity payout in shares of Common Stock. These shares are required to be held until the executive terminates employment with the Company. This policy applies to equity awards granted in 2010 and later and is intended to further align the interests of our executives with our shareholders. The Company’s Code of Conduct prohibits all employees (including executives) and Directors from engaging in hedging strategies using puts, calls or other types of derivative securities based upon the value of our Common Stock.
 
 
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Why do the amounts of severance paid following termination of employment differ among the Named Executive Officers?
 
The narrative and tables beginning on page 66 outline the potential payments that would be made to the Named Executive Officers following their termination of employment under various scenarios. The difference in treatment among the Named Executive Officers is due to the dynamics of negotiation at the time the executive was hired (or promoted), the executive’s position in the Company, market practices and Company policies in effect at the time of entry into the agreement.
 
V.      Governance Policies
 
Does the Compensation Committee use an independent compensation consultant?
 
The Compensation Committee has engaged Cook to provide independent compensation consulting services to the Compensation Committee. The role of the compensation consultant is to ensure that the Compensation Committee has objective information needed to make informed decisions in the best interests of shareholders based on compensation trends and practices in public companies. During the past year, the Compensation Committee requested Cook to: (i) assist in the development of agendas and materials for Compensation Committee meetings; (ii) provide market data and alternatives to consider for making compensation decisions for the CEO and other executive officers; (iii) assist in the redesign of the Company’s long-term compensation program; and (iv) keep the Compensation Committee and the Board abreast of changes in the executive compensation environment. In 2010, a representative of Cook attended 8 of 12 Compensation Committee meetings, including, when invited, executive sessions. Cook also advises the Nominating Committee regarding Director compensation. In accordance with Compensation Committee policy, the Company does not engage Cook for any services other than in support of these two Committees. The Compensation Committee has the sole authority to determine the compensation for and to terminate the services of Cook. For services provided to the Compensation Committee and the Nominating Committee in 2010, we paid Cook $155,515.
 
What is the role of the CEO and the Board of Directors in determining compensation?
 
The CEO personally reviews and reports to the Compensation Committee on the performance of all senior executives and provides specific compensation recommendations to the Committee. The Compensation Committee considers this information in making compensation decisions for these executives, but the Committee does not delegate its decision making authority to the CEO or other individuals. The CEO also provides to the Compensation Committee a self-evaluation. The CEO does not, however, present a recommendation for his own compensation. Prior to making any decisions regarding CEO compensation, the Compensation Committee consults with the nonmanagement Directors and receives input from Cook. After discussing proposed compensation decisions for the CEO with the nonmanagement Directors, the Compensation Committee determines the CEO’s compensation. The CEO is not present when his performance or compensation is evaluated and determined, unless invited by the Compensation Committee.
 
Does the Compensation Committee review tally sheets?
 
In setting executive officer compensation, the Compensation Committee, with assistance from Cook, reviews tally sheets prepared for each executive officer. The tally sheets provide information that is in addition to the information shown in the 2010 Summary Compensation Table. The tally sheets show not only current year compensation, but also historical equity gains and the in-the-money value of outstanding equity awards (vested and unvested). The tally sheets also show amounts that would be paid under various termination of employment scenarios. While compensation decisions are based on competitive market pay data and individual performance, the Compensation Committee uses the tally sheets as a reference point and as a basis for comparing program participation across the executive group. In particular, the Compensation Committee uses the tally sheets to understand the effect compensation decisions have on various possible termination of employment scenarios. During 2010, the information in the tally sheets
 
 
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was consistent with the Compensation Committee’s expectations and, therefore, the tally sheets did not have an effect on individual compensation decisions.
 
Does the Company have a clawback/recoupment policy?
 
Effective January 1, 2009, the Company adopted a policy regarding the recoupment of performance-based incentive compensation. Under the policy, if the Board of Directors determines that a senior executive of the Company has engaged in fraud or intentional misconduct that has caused a material restatement of the Company’s financial statements, the Board will review the performance-based compensation earned by that senior executive on the basis of the Company’s performance during the periods materially affected by the restatement. If, in the Board’s view, the performance-based compensation would have been lower if it had been based on the restated results, the Board may seek to recoup the portion of the performance-based compensation that would not have been awarded to that senior executive. This policy applies to the Company’s executive officers as well as the Chief Accounting Officer and Head of Internal Audit. In addition, equity awards issued to employees include a provision that allows the Company to recoup gains if the employee violates covenants that prohibit terminated employees from soliciting our customers and employees, disclosing confidential information and, for some employees, providing services to certain competitors of the Company.
 
Does the Compensation Committee review risk associated with the Company’s compensation policies and practices?
 
As part of its compensation review process, the Compensation Committee requested the Company’s Chief Enterprise Risk Officer to oversee a review of the Company’s compensation policies for executives and other employees to determine whether these programs create risks that, individually or in the aggregate, are reasonably likely to have a material adverse effect on the Company. As part of this risk review process, the Chief Enterprise Risk Officer, assisted by human resources personnel, inventoried all Company compensation programs and established a financial framework, consistent with other enterprise risk management protocols, to identify compensation policies or practices that could have a material adverse effect on the Company. This review included the structure and material features of each program, the behaviors the programs are intended to reward, as well as program features or Company policies that operate to mitigate risk. After conducting the review and assessing potential risks, the Company determined, and the Compensation Committee concurred, that the design of each incentive program contains sufficient design features, controls, limits and/or financial requirements so that the program does not create risks that are reasonably likely to have a material adverse effect on the Company.
 
Although a significant portion of the Company’s executive compensation is performance-based, we do not believe that our programs encourage excessive or unnecessary risk-taking. Overall, our compensation mix, including the use of equity and other long-term incentives, is generally consistent with competitive market practice. While risk is a necessary part of growing a business, our executive compensation program attempts to mitigate risk and align the Company’s compensation policies with the long-term interests of the Company by selecting performance goals that are directly aligned with the Company’s strategic plan, balancing annual and longer-term incentives, using multiple performance measures (including financial and non-financial measures) and applying program caps. Other risk mitigation features include the Company’s executive stock ownership requirement and the Company’s “clawback” policy which are described on pages 52 and 54, respectively.
 
VI.      Comparison Group Company Lists
 
The companies in each of the compensation Comparison Groups are listed below. The companies in the Health Care Comparison Group were selected because they represent our closest competitors. The companies in the Cross-Industry Comparison Group are selected from the FORTUNE 300 and are companies that we compete against for talent and capital, without regard to industry. For 2011, the Company modified the Cross-Industry Comparison Group as described below. The pay information for each
 
 
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group is developed using market pay survey data provided by Cook and data purchased from third-party compensation vendors.
 
2010 Health Care Comparison Group:
 
         
CIGNA Corporation
  Coventry Health Care, Inc.   Humana Inc.
UnitedHealth Group Incorporated
  WellPoint, Inc.    
 
2010 Cross-Industry Comparison Group(1):
 
         
3M Company
Allstate Insurance Company
Baxter International Inc.*
Bristol-Myers Squibb Company
The Chubb Corporation
CIGNA Corporation
Colgate-Palmolive Company
Comcast Corporation
Coventry Health Care, Inc.
General Dynamics Corporation
Genworth Financial, Inc.
The Hartford Financial Services
  Group, Inc.
HCA Holdings, Inc. 
Honeywell International Inc.
  Humana Inc.
ING Americas, Inc.
International Paper Company
Johnson & Johnson
Kaiser Permanente
Kimberly-Clark Corporation*
Kraft Foods Inc.*
Lockheed Martin Corporation
Medco Health Solutions, Inc.
Medtronic, Inc.*
Merck & Co., Inc.
Metropolitan Life Insurance Company
Nationwide Insurance Companies
Northrop Grumman Corporation
  Qwest Communications
  International Inc.*
PepsiCo, Inc.
Pfizer Inc.
The Procter & Gamble Company
Raytheon Company
State Farm Mutual Automobile
  Insurance Company
Time Warner Inc.*
The Travelers Companies, Inc.*
United Technologies Corporation
UnitedHealth Group Incorporated
The Walt Disney Company
WellPoint, Inc.
Xerox Corporation
 
* New for 2010
 
(1) If pay data for a comparable position is not available from a company on this list, the company is not included in the Cross-Industry Comparison Group for that position.
 
Third Party Compensation Surveys:
 
•  Frederic W. Cook & Co., Inc. Long-Term Incentive Survey;
 
•  Pearl Meyer Executive and Senior Management Total Compensation Survey;
 
•  Mercer’s Integrated Health Network Survey; and
 
•  Hewitt Total Compensation Measurement Survey.
 
2011 Peer Groups:
 
Following Aetna’s Annual Meeting of Shareholders in 2010, the Compensation Committee reviewed the compensation comparison groups, and decided to modify the Cross-Industry Compensation Comparison Group to include only companies that have revenues between .5 and 2 times Aetna’s revenue. This change is intended to better align compensation decisions with the compensation of similarly sized companies with whom we compete for talent.
 
2011 Revised Cross-Industry Comparison Group:
 
         
         
3M Company
Allstate Insurance Company
Bristol-Myers Squibb Company
CIGNA Corporation
Comcast Corporation
General Dynamics Corporation
HCA Holdings, Inc.
Honeywell International Inc.
Humana Inc.
International Paper Company
  Johnson & Johnson
Kaiser Permanente
Kimberly-Clark Corporation
Kraft Foods Inc.
Lockheed Martin Corporation
Medco Health Solutions, Inc.
Merck & Co., Inc.
Metropolitan Life Insurance Company
Nationwide Insurance Companies
Northrop Grumman Corporation
  PepsiCo, Inc.
Pfizer Inc.
Raytheon Company
State Farm Mutual Automobile
  Insurance Company
Time Warner Inc.
The Travelers Companies, Inc.
United Technologies Corporation
The Walt Disney Company
WellPoint, Inc.
Xerox Corporation
 
 
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Executive Compensation
 
The 2010 Summary Compensation Table summarizes the total compensation paid or earned for the fiscal year ended December 31, 2010 and applicable comparative data for 2009 and 2008 by our Chairman, Chief Executive Officer and President, our Retired Chairman and former Chief Executive Officer, our Chief Financial Officer and our three other most highly paid executive officers (collectively, the “NEOs” or “Named Executive Officers”). When setting compensation for each of the Named Executive Officers, the Compensation Committee reviews tally sheets which show the executive’s current compensation, including equity and non-equity based compensation.
 
The ABP award amounts for 2010 are disclosed in the 2010 Summary Compensation Table as “Non-Equity Incentive Plan Compensation” and are not categorized as a “Bonus” payment under SEC rules. The amounts listed under “Non-Equity Incentive Plan Compensation” were approved by the Compensation Committee in January 2011. Please refer to the 2010 Grants of Plan-Based Awards Table and related footnotes beginning on page 58 for information about the number of RSUs, PSUs and MSUs, as applicable, awarded to each of the Named Executive Officers in the fiscal year ended December 31, 2010.
 
The Company has entered into employment arrangements with certain of the Named Executive Officers. Refer to “Agreements with Named Executive Officers” beginning on page 74 for a discussion of those employment arrangements.
 
2010 Summary Compensation Table
 
The following table shows the compensation provided by Aetna to each of the Named Executive Officers in 2010 and applicable comparative data for 2009 and 2008.
 
                                                                 
 
                        Change in
       
                        Pension
       
                        Value and
       
                    Non-Equity
  Nonqualified
       
                    Incentive
  Deferred
       
            Stock
  Option
  Plan
  Compensation
  All Other
   
Name and
          Awards
  Awards
  Compensation
  Earnings
  Compensation
   
Principal Position   Year   Salary   (3)   (6)   (8)   (9)   (10)   Total
 
 
Mark T. Bertolini     2010     $ 937,318     $ 5,827,331     $ 0     $ 1,894,848     $ 31,890     $ 117,465     $ 8,808,852  
Chairman, Chief Executive     2009       932,414       7,150,030 (4)(5)     3,806,838       612,144       54,682       71,692       12,627,800  
Officer and President     2008       919,368       1,290,011 (4)     3,010,805       1,390,500       0       40,176       6,650,860  
                                                                 
William J. Casazza     2010       498,129       2,100,023       0       672,461       128,234       9,217       3,408,064  
Senior Vice President and     2009       498,129       1,530,128 (4)(5)     1,453,528       218,020       245,183       14,039       3,959,027  
General Counsel     2008       491,283       540,006 (4)     1,260,343       404,208       0       17,681       2,713,521  
                                                                 
Margaret M. McCarthy(1)     2010       588,506       3,600,037       0       837,312       18,550       65,905       5,110,310  
Executive Vice President,
Operations and Technology
                                                               
                                                                 
Lonny Reisman, M.D.      2010       547,893       1,600,048       0       976,800       0       150,064       3,274,805  
Senior Vice President and     2009       547,893       450,022 (4)     207,658       239,800       0       23,143       1,468,516  
Chief Medical Officer     2008       497,475       180,036 (4)     1,532,806       692,083       0       8,144       2,910,544  
                                                                 
Joseph M. Zubretsky     2010       730,728       5,800,034       0       1,252,820       10,165       77,343       7,871,090  
Senior Executive Vice     2009       725,211       4,940,027 (4)(5)     2,630,183 (7)     396,760       8,816       38,198       8,739,195  
President and Chief Financial Officer     2008       715,064       900,026 (4)     2,100,567       865,200 (7)     5,477       44,763       4,631,097  
                                                                 
Ronald A. Williams(1)     2010       1,095,785 (2)     14,300,022       0       2,752,200       2,283,123       299,838       20,730,968  
Retired Chairman and     2009       1,095,785 (2)     4,300,011 (4)     9,887,890       900,000       1,665,817       208,659       18,058,162  
former Chief Executive Officer     2008       1,091,764 (2)     4,300,019 (4)     10,002,642       1,950,000       1,162,866       101,487       18,608,778  
 
 
 
(1) Ms. McCarthy was not a NEO in Aetna’s 2009 or 2010 Proxy Statement. As a result, her 2008 and 2009 compensation as an employee of the Company is not included in the 2010 Summary Compensation Table. Mr. Williams ceased serving as Chief Executive Officer on November 29, 2010, and retired as Chairman on April 8, 2011.
 
(2) During 2010, 2009 and 2008, Mr. Williams mandatorily deferred $99,617, $99,617 and $99,237 of his salary, respectively, into an interest bearing account in order to preserve the tax deductibility of such amounts under
 
 
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Section 162(m) of the Code. The amounts deferred during 2010 are included in the 2010 Nonqualified Deferred Compensation Table on page 64.
 
(3) The amounts reported in this column represent the aggregate grant date fair value of the stock awards granted in the relevant year computed in accordance with FASB ASC Topic 718, excluding forfeiture estimates. Refer to page 85 of Aetna’s 2010 Annual Report, Financial Report to Shareholders for all relevant valuation assumptions used to determine the grant date fair value of the stock awards included in this column. Amounts shown in this column for 2010 include the grant date fair value of RSUs, PSUs and MSUs granted to each Named Executive Officer in 2010 based upon the grant date value of RSUs and the probable outcome of the performance conditions associated with these PSUs and MSUs as of the date of grant. Ms. McCarthy and Mr. Zubretsky were the only NEOs to receive grants of RSUs in 2010. The grant date fair value of the PSUs granted in 2010 assuming the highest level of performance conditions associated with these PSUs occurs is as follows: Mr. Bertolini, $3,954,601; Mr. Casazza, $1,260,038; Ms. McCarthy, $1,560,039; Dr. Reisman, $960,038; Mr. Zubretsky, $2,280,053; and Mr. Williams $8,600,042. The grant date fair value of the MSUs granted in 2010 assuming the highest level of performance conditions associated with these MSUs occurs is as follows: Mr. Bertolini, $5,775,047; Mr. Casazza, $2,205,006; Ms. McCarthy, $2,730,019; Dr. Reisman, $1,680,043; Mr. Zubretsky, $3,990,001; and Mr. Williams, $15,000,001. Since the Compensation Committee has determined that the Company achieved the one-year operating earnings per share and/or revenue goal for 2010, at the end of the two-year vesting period on February 8, 2012, each MSU will be converted into between zero and 1.5 shares of Common Stock. The conversion ratio will be calculated by dividing the average closing price of the Common Stock for the final 30 trading days of the two-year vesting period by $29.20, the closing price of the Common Stock on the February 8, 2010 grant date. The resulting quotient will be capped at 1.5 and will be multiplied by the number of MSUs granted to yield the number of MSUs that vest. Each vested MSU represents one share of Common Stock and will be paid in shares of Common Stock, net of taxes, following February 8, 2012.
 
(4) Represents the grant date fair value of PSUs granted to each Named Executive Officer in 2008 and 2009 based upon the probable outcome of the performance conditions associated with these PSUs as of the date of grant. Because the threshold performance level associated with these PSUs was not achieved, all of the PSUs granted in each of 2008 and 2009 expired without payment.
 
(5) In addition to the PSUs granted in 2009, amounts shown also include the grant date fair value of RSUs granted to these Named Executive Officers in 2009.
 
(6) Amounts shown in this column represent the grant date fair value of SARs granted to each Named Executive Officer in 2008 and 2009. No SARs were granted to any Named Executive Officer in 2010. The SAR values are calculated using a modified Black-Scholes Model for pricing options. Refer to page 85 of Aetna’s 2010 Annual Report, Financial Report to Shareholders for all relevant valuation assumptions used to determine the grant date fair value of the SARs included in this column.
 
(7) Mr. Zubretsky elected to exchange $40,000 of his ABP award for 2008 for SARs with an exercise price equal to the closing price of the Common Stock on February 13, 2009, the date of grant, which was $32.11. This amount is included in the 2008 Non-Equity Incentive Plan Compensation figure but not the 2009 Option Awards figure.
 
(8) Amounts shown in this column represent bonus awards for the relevant calendar year under the ABP. For 2010, bonus pool funding under the ABP depended upon Aetna’s performance against certain measures discussed under “How are annual performance-based bonuses determined?” beginning on page 47.
 
(9) Amounts in this column only reflect pension values and do not include earnings on deferred compensation amounts because such earnings are non-preferential. Refer to “2010 Nonqualified Deferred Compensation Table” and “Deferred Compensation Narrative” beginning on page 64 for a discussion of deferred compensation. The following table presents the change in present value of accumulated benefits under the Pension Plan and Supplemental Pension Plan from December 31, 2009 through December 31, 2010. See “Pension Plan Narrative” beginning on page 63 for a discussion of pension benefits and the economic assumptions behind the figures in this table.
 
 
 
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        Supplemental
Named Executive Officer   Pension Plan   Pension Plan
 
 
Mark T. Bertolini
    21,380       10,510  
William J. Casazza
    66,685       61,549  
Margaret M. McCarthy
    15,086       3,464  
Lonny Reisman, M.D. 
    0 (a)     0 (a)
Joseph M. Zubretsky
    10,165       0  
Ronald A. Williams
  $ 36,390     $ 2,246,733  
 
 
(a) Dr. Reisman is not eligible to participate in the Pension Plan or Supplemental Pension Plan because he joined the Company through its acquisition of Active Health Management, Inc.
 
(10) All Other Compensation consists of the following for 2010:
 
                                                 
    Mark T.
    William J.
    Margaret M.
    Lonny
    Joseph M.
    Ronald A.
 
    Bertolini     Casazza     McCarthy     Reisman, M.D.     Zubretsky     Williams  
   
 
Personal Use of Corporate Aircraft(a)   $ 54,380     $ 0     $ 59,476     $ 80,038     $ 34,106     $ 257,659  
Personal Use of Corporate Vehicles(b)     5,666       0       211       21,203       32,144       15,961  
Professional Association Dues     0       2,199       0       22,605       375       0  
Financial Planning     0       800       0       20,000       4,500       20,000  
Legal Fees(c)     51,201       0       0       0       0       0  
Company Matching Contributions Under 401(k) Plan     6,218       6,218       6,218       6,218       6,218       6,218  
                                                 
Total   $ 117,465     $ 9,217     $ 65,905     $ 150,064     $ 77,343     $ 299,838  
 
 
 
   (a)  The calculation of incremental cost for personal use of Company aircraft includes only those variable costs incurred as a result of personal use, such as fuel and allocated maintenance costs, and excludes non-variable costs which the Company would have incurred regardless of whether there was any personal use of the aircraft.
 
   (b)  Represents the aggregate incremental cost to the Company of personal use of a Company driver and vehicle.
 
   (c)  Represents reimbursement of Mr. Bertolini’s legal fees associated with negotiating an amendment to his employment agreement.
 
2010 Grants of Plan-Based Awards Table
 
The following table sets forth information concerning plan-based equity and non-equity awards granted by Aetna during 2010 to the Named Executive Officers.
 
                                                                                 
 
                                    All Other
   
                                    Stock
   
                                    Awards:
   
            Estimated Future Payouts Under
  Estimated Future Payouts Under
  Number of
  Grant Date
            Non-Equity Incentive Plan
  Equity Incentive Plan
  Shares of
  Fair
            Awards(5)   Awards   Stock or
  Value of Stock
        Approval
  Threshold
  Target
  Maximum
  Threshold
  Target
  Maximum
  Units
  and Option
Name   Grant Date   Date   ($)   ($)   ($)   (#)   (#)   (#)   (#)   Awards(6)
 
Mark T. Bertolini     2/08/2010       1/21/2010 (1)     $—     $     $       0       56,507       113,014           $ 1,650,004  
      2/08/2010       1/21/2010 (2)                       0       113,738       170,607             3,850,031  
      11/29/2010       10/12/2010 (3)                       0       10,852       21,704             327,296  
                      0       1,136,000       3,000,000                                          
William J. Casazza     2/08/2010       1/21/2010 (1)                       0       21,576       43,152             630,019  
      2/08/2010       1/21/2010 (2)                       0       43,427       65,141             1,470,004  
                      0       400,036       3,000,000                                          
Margaret M. McCarthy     2/08/2010       1/21/2010 (1)                       0       26,713       53,426             780,020  
      2/08/2010       1/21/2010 (2)                       0       53,767       80,651             1,820,013  
      12/2/2010       12/02/2010 (4)                                         32,787       1,000,004  
                      0       534,000       3,000,000                                          
Lonny Reisman, M.D.      2/08/2010       1/21/2010 (1)                       0       16,439       32,878             480,019  
      2/08/2010       1/21/2010 (2)                       0       33,088       49,632             1,120,029  
                      0       440,000       3,000,000                                          
Joseph M. Zubretsky     2/08/2010       1/21/2010 (1)                       0       39,042       78,084             1,140,026  
      2/08/2010       1/21/2010 (2)                       0       78,582       117,873             2,660,001  
      12/2/2010       12/2/2010 (4)                                         65,574       2,000,007  
                      0       740,000       3,000,000                                          
Ronald A. Williams     2/08/2010       1/21/2010 (1)                       0       147,261       294,522             4,300,021  
      2/08/2010       1/21/2010 (2)                       0       295,421       443,132             10,000,001  
                      0       1,650,000       3,000,000                                          
 
 
 
 
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(1) The Compensation Committee approved the grant of these PSUs at its meeting on January 21, 2010, with an effective grant date of February 8, 2010. As discussed in “What is the Company’s policy on the grant date of equity awards?” on page 51, of the Compensation Discussion and Analysis, the Company’s annual equity awards are made at the closing price of the Common Stock on the next stock market trading day after the release of Aetna’s full year earnings. The release of Aetna’s full year earnings occurs prior to the opening of trading on the NYSE. In 2010, Aetna announced its full year 2009 earnings on February 5, 2010, and the grants of equity awards were made effective at the close of business on February 8, 2010. Represents 2010-2011 PSUs granted under the Aetna Inc. 2000 Stock Incentive Plan (the “2000 Stock Plan”) in the respective amounts listed. The Compensation Committee has determined that the 2010-2011 PSUs met the one-year performance goal set at the time of grant at the maximum level and will continue to vest until February 8, 2012. The PSUs do not earn dividend equivalents and have no voting rights. See the discussion of long-term equity incentive awards in “Compensation Discussion and Analysis” on page 50 for a discussion of the vesting of these awards based on the Compensation Committee’s determination as to the Company’s attainment of the applicable performance metrics. Each vested PSU represents one share of Common Stock and will be paid in shares of Common Stock, net of taxes, as result of the determination by the Compensation Committee described in this footnote.
 
(2) Represents 2010-2011 MSUs granted effective February 8, 2010, under the 2000 Stock Plan in the respective amounts listed. The Compensation Committee has determined that the 2010-2011 MSUs met the one-year performance goal set at the time of the grant, which allows for the continued vesting of these MSU awards. The 2010-2011 MSUs will vest on February 8, 2012. The MSUs do not earn dividend equivalents and have no voting rights. See the discussion of long-term incentive equity awards in “Compensation Discussion and Analysis” on page 50 for a discussion of the vesting of these awards based on the Compensation Committee’s determination as to the Company’s attainment of the applicable performance metrics. Refer to note 3 on page 57 for a description of how the number of vested MSUs will be determined. Each vested MSU represents one share of Common Stock and will be paid in shares of Common Stock, net of taxes, as a result of the determination by the Compensation Committee described in this footnote.
 
(3) The Compensation Committee approved the grant of these PSUs at its meeting on October 12, 2010, with an effective grant date of November 29, 2010. These PSUs were granted under the Aetna Inc. 2010 Stock Incentive Plan (the “2010 Stock Plan”). The Compensation Committee has determined that these PSUs met the Company performance goal at the maximum level and will continue to vest until November 29, 2012. The performance goal for these PSUs is the same as the performance goal for the PSUs granted on February 8, 2010. These PSUs do not earn dividend equivalents and have no voting rights. See the discussion of long-term incentive equity awards in “Compensation Discussion and Analysis” on page 50 for a discussion of the vesting of these awards based on the Compensation Committee’s determination as to the Company’s attainment of the applicable performance metrics. Each vested PSU represents one share of Common Stock and will be paid in shares of Common Stock, net of taxes, as a result of the determination by the Compensation Committee described in this footnote.
 
(4) The Compensation Committee approved the grant of these RSUs at its meeting on December 2, 2010, with an effective grant date of December 2, 2010. These RSUs were granted under the 2010 Stock Plan. These RSUs will vest 100% on December 2, 2013 and will be paid in shares of Common Stock, net of taxes. Each vested RSU represents one share of Common Stock.
 
(5) Represents the range of possible bonus amounts available for 2010 under the ABP. See “Compensation Discussion and Analysis” beginning on page 47 for a discussion of bonus metrics and payouts.
 
(6) Refer to page 85 of Aetna’s 2010 Annual Report, Financial Report to Shareholders for all relevant valuation assumptions.
 
 
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Outstanding Equity Awards at 2010 Fiscal Year-End Table
 
The following table sets forth information concerning outstanding stock options, SARs, PSUs, MSUs and RSUs as of December 31, 2010 held by the Named Executive Officers. Based on full year 2010 earnings which were available in February 2011, the Compensation Committee determined that the 2010-2011 PSUs met the one-year Company performance goal set at the time of the grant at the maximum level and will continue to vest until February 8, 2012; and the Committee determined that the 2010-2011 MSUs met the performance goal set at the time of grant, which allows for the continued vesting of these MSU awards. The 2010-2011 MSUs will vest on February 8, 2012. Unvested 2010-2011 PSUs are illustrated below at maximum performance and unvested 2010-2011 MSUs are illustrated below at target performance.
 
                                                 
 
    Option Awards   Stock Awards
    Number of
  Number of
              Market Value
    Securities
  Securities
          Number of
  of Shares or
    Underlying
  Underlying
          Shares or
  Units of Stock
    Unexercised
  Unexercised
  Option
  Option
  Units of Stock
  That Have
    Options
  Options
  Exercise
  Expiration
  That Have
  Not Vested
Name   Exercisable   Unexercisable   Price   Date   Not Vested   (13)
 
 
Mark T. Bertolini
    100,000       0       10.4125       2/24/2013       362,647 (7)   $ 11,064,360  
      100,000       0       10.47       2/27/2013                  
      112,000       0       19.375       2/13/2014                  
      130,272       0       33.375       2/11/2015                  
      97,474       0       50.205       2/10/2016                  
      106,570       0       39.93       6/30/2016                  
      148,138       0       42.57       2/09/2017                  
      308,642       0       48.65       7/27/2017                  
      131,931       65,966 (1)     50.70       2/08/2018                  
      99,917       199,834 (1)     32.11       2/13/2019                  
William J. Casazza
    12,666       0       10.47       2/27/2013       112,990 (8)     3,447,325  
      20,000       0       19.375       2/13/2014                  
      22,800       0       33.375       2/11/2015                  
      23,834       0       42.35       9/29/2015                  
      75,678       0       50.205       2/10/2016                  
      86,414       0       42.57       2/09/2017                  
      55,227       27,614 (2)     50.70       2/08/2018                  
      38,151       76,300 (2)     32.11       2/13/2019                  
Margaret M. McCarthy
    6,204       0       33.375       2/11/2015       147,086 (9)     4,487,594  
      12,460       0       41.54       6/23/2015                  
      23,310       0       50.205       2/10/2016                  
      49,380       0       42.57       2/09/2017                  
      11,687       0       53.96       11/12/2017                  
      49,091       24,545 (3)     50.70       2/08/2018                  
      43,601       87,200 (3)     32.11       2/13/2019                  
Lonny Reisman, M.D. 
    72,000       0       39.045       5/27/2015       65,966 (10)     2,012,623  
      21,314       0       39.93       6/30/2016                  
      21,480       0       42.57       2/09/2017                  
      18,409       9,205 (4)     50.70       2/08/2018                  
      85,588       42,794 (4)     21.81       11/12/2018                  
      5,451       10,900 (4)     32.11       2/13/2019                  
Joseph M. Zubretsky
    84,890       0       44.22       2/28/2017       301,136 (11)     9,187,659  
      203,736       0       44.22       2/28/2017                  
      92,045       46,023 (5)     50.70       2/08/2018                  
      69,034       138,067 (5)     32.11       2/13/2019                  
      6,921 (5)     0       32.11       2/13/2014                  
Ronald A. Williams
    1,080,000       0       10.47       2/27/2013       589,943 (12)     17,999,161  
      900,000       0       19.375       2/13/2014                  
      744,412       0       33.375       2/11/2015                  
      605,422       0       50.205       2/10/2016                  
      706,124       0       42.57       2/09/2017                  
      438,309       219,154 (6)     50.70       2/08/2018                  
      259,525       519,049 (6)     32.11       2/13/2019                  
 
 
 
 
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(1) Consists of 65,966 SARs that vest in one installment on February 8, 2011; and 199,834 SARs that vest in two equal installments on February 13, 2011 and February 13, 2012.
 
(2) Consists of 27,614 SARs that vest in one installment on February 8, 2011; and 76,300 SARs that vest in two equal installments on February 13, 2011 and February 13, 2012.
 
(3) Consists of 24,545 SARs that vest in one installment on February 8, 2011; and 87,200 SARs that vest in two equal installments on February 13, 2011 and February 13, 2012.
 
(4) Consists of 9,205 SARs that vest in one installment on February 8, 2011; 42,794 SARs that vest in one installment on November 12, 2011; and 10,900 SARs that vest in two equal installments on February 13, 2011 and February 13, 2012.
 
(5) Consists of 46,023 SARs that vest in one installment on February 8, 2011; and 138,067 SARs that vest in two substantially equal installments on February 13, 2011 and February 13, 2012. Also includes 6,921 SARs granted in lieu of a portion of Mr. Zubretsky’s ABP award for 2008, at Mr. Zubretsky’s election, which are currently exercisable.
 
(6) Consists of 219,154 SARs that vest in one installment on February 8, 2011; and 519,049 SARs that vest in two substantially equal installments on February 13, 2011 and February 13, 2012.
 
(7) Consists of 114,191 RSUs that vest in one installment on February 13, 2012; 56,507 PSUs granted on February 8, 2010, that will vest on February 8, 2012, at maximum performance; 10,852 PSUs granted on November 29, 2010 that will vest on November 29, 2012 at maximum performance; and 113,738 MSUs granted on February 8, 2010, that will vest on February 8, 2012. Refer to note 3 on page 57 for a description of how the number of vested MSUs will be determined. Excludes 51,386 PSUs granted in 2009 that expired without payment after the Compensation Committee determined that the Company did not meet the two-year performance goal that was set at the time these PSUs were granted.
 
(8) Consists of 26,411 RSUs that vest in two substantially equal installments on March 10, 2011 and March 10, 2012; 21,576 PSUs granted on February 8, 2010, that will vest on February 8, 2012, at maximum performance; and 43,427 MSUs granted on February 8, 2010, that will vest on February 8, 2012. Refer to note 3 on page 57 for a description of how the number of vested MSUs will be determined. Excludes 19,621 PSUs granted in 2009 that expired without payment after the Compensation Committee determined that the Company did not meet the two-year performance goal that was set at the time these PSUs were granted.
 
(9) Consists of 7,106 RSUs that vest in one installment on April 25, 2011; 32,787 RSUs that vest in one installment on December 2, 2013; 26,713 PSUs granted on February 8, 2010, that will vest on February 8, 2012, at maximum performance; and 53,767 MSUs granted on February 8, 2010, that will vest on February 8, 2012. Refer to note 3 on page 57 for a description of how the number of vested MSUs will be determined. Excludes 22,423 PSUs granted in 2009 that expired without payment after the Compensation Committee determined that the Company did not meet the two-year performance goal that was set at the time these PSUs were granted.
 
(10) Consists of 16,439 PSUs granted on February 8, 2010, that will vest on February 8, 2012, at maximum performance; and 33,088 MSUs granted on February 8, 2010, that will vest on February 8, 2012. Refer to note 3 on page 57 for a description of how the number of vested MSUs will be determined. Excludes 14,015 PSUs granted in 2009 that expired without payment after the Compensation Committee determined that the Company did not meet the two-year performance goal that was set at the time these PSUs were granted.
 
(11) Consists of 78,896 RSUs that vest in one installment on February 13, 2012; 65,574 RSUs that vest in one installment on December 2, 2013; 39,042 PSUs granted on February 8, 2010, that will vest on February 8, 2012, at maximum performance; and 78,582 MSUs granted on February 8, 2010, that will vest on February 8, 2012. Refer to note 3 on page 57 for a description of how the number of vested MSUs will be determined. Excludes 35,503 PSUs granted in 2009 that expired without payment after the Compensation Committee determined that the Company did not meet the two-year performance goal that was set at the time these PSUs were granted.
 
(12) Consists of 147,261 PSUs granted on February 8, 2010, that will vest on February 8, 2012, at maximum performance; and 295,421 MSUs granted on February 8, 2010, that will vest on February 8, 2012. Refer to note 3 on page 57 for a description of how the number of vested MSUs will be determined. Excludes 133,915 PSUs granted in 2009 that expired without payment after the Compensation Committee determined that the Company did not meet the two-year performance goal that was set at the time these PSUs were granted.
 
(13) Market value calculated using December 31, 2010 closing price of the Common Stock of $30.51. For purposes of calculating the market value of unvested MSUs, the average closing price of the Common Stock for the final 30 trading days of the two-year vesting period also was assumed to be $30.51.
 
 
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2010 Option Exercises and Stock Vested Table
 
The following table sets forth information concerning the gross number of stock options and/or SARs exercised and RSUs vested during 2010 for the Named Executive Officers. None of our NEOs acquired shares based on the vesting of PSUs or MSUs during 2010.
 
                                 
 
    Option Awards   Stock Awards
    Number of
      Number of
   
    Shares Acquired
  Value Realized
  Shares Acquired
  Value Realized
Name   on Exercise   on Exercise(1)   on Vesting   on Vesting(9)
 
 
Mark T. Bertolini
    0     $ 0       64,143 (3)   $ 1,810,833  
William J. Casazza
    20,000       212,500       17,317 (4)     537,066  
Margaret M. McCarthy
    0       0       10,010 (5)     299,705  
Lonny Reisman, M.D. 
    0       0       1,022 (6)     29,607  
Joseph M. Zubretsky
    0       0       75,254 (7)     2,195,705  
Ronald A. Williams
    2,400,000       50,383,680 (2)     33,592 (8)     973,160  
 
 
(1) Calculated by multiplying (a) the difference between (i) the market price of our Common Stock at the time of the exercise and (ii) the exercise price of the stock options or SARs, and (b) the number of stock options or SARs exercised.
 
(2) All of the stock options Mr. Williams exercised in 2010 were granted when he joined the Company in 2001 and had an expiration date of March 15, 2011.
 
(3) Consists of 7,047 shares of Common Stock acquired upon the partial vesting of RSUs granted in 2007 and 57,096 shares acquired upon the partial vesting of RSUs granted in 2009.
 
(4) Consists of 4,111 shares of Common Stock acquired upon the partial vesting of RSUs granted in 2007 and 13,206 shares acquired upon the partial vesting of RSUs granted in 2009.
 
(5) Consists of 2,905 shares of Common Stock acquired upon the partial vesting of RSUs granted in 2007. Ms. McCarthy elected to defer the value of 7,105 shares that were acquired upon the partial vesting of RSUs granted in 2008, net of applicable withholding taxes, into her deferred stock account. Refer to footnote 1 to the 2010 Nonqualified Deferred Compensation Table beginning on page 64 for a list of all deferral contributions by the Named Executive Officers during 2010.
 
(6) Consists of 1,022 shares of Common Stock acquired upon the partial vesting of RSUs granted in 2007.
 
(7) Consists of 35,806 shares of Common Stock acquired upon the partial vesting of RSUs granted in 2007 and 39,448 shares acquired upon the partial vesting of RSUs granted in 2009.
 
(8) Consists of 33,592 shares of Common Stock acquired upon the partial vesting of RSUs granted in 2007.
 
(9) Calculated by multiplying the number of shares of Common Stock acquired on vesting by the closing price of the Common Stock on the vesting date.
 
2010 Pension Benefits Table
 
The following table sets forth information concerning the present value of the Named Executive Officers’ respective accumulated benefits under the Pension Plan and Supplemental Pension Plan. The present value of the accrued benefit shown below was determined for each participant based on the participant’s actual pay and service through December 31, 2010, the pension plan measurement date used by the Company in 2010 for accounting purposes, and assumes continued employment to age 65 for Ms. McCarthy and Messrs. Bertolini, Zubretsky and Williams. Mr. Casazza is eligible to retire with an unreduced final average pay benefit at age 62. Pursuant to SEC rules, the valuations shown below do not take into account any assumed future pay increases. Dr. Reisman is not eligible to participate in the Pension Plan or
 
 
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Supplemental Pension Plan because he joined the Company through its acquisition of Active Health Management, Inc. Effective January 1, 2011, the Pension Plan was frozen.
 
                             
 
        Number of Years
  Present Value of
  Payments During
Name   Plan Name   Credited Service   Accumulated Benefit(2)   Last Fiscal Year
 
 
Mark T. Bertolini
  Pension Plan     11.08     $ 112,058     $ 0  
    Supplemental Pension Plan(1)             182,808       0  
William J. Casazza
  Pension Plan     18.25       476,733       0  
    Supplemental Pension Plan(1)             786,418       0  
Margaret M. McCarthy
  Pension plan     6.75       72,765       0  
    Supplemental Pension Plan(1)             63,516       0  
Lonny Reisman, M.D. 
  Pension Plan     0 (4)     0       0  
    Supplemental Pension Plan             0       0  
Joseph M. Zubretsky
  Pension Plan     2.83       24,458       0  
    Supplemental Pension Plan(1)             0       0  
Ronald A. Williams
  Pension Plan     9.83       188,619       0  
    Supplemental Pension Plan(1)             9,489,180 (3)     0  
 
 
 
(1) As of January 1, 2007, the Supplemental Pension Plan is no longer used to accrue benefits that exceed the Code limits, but interest continues to accrue on the outstanding cash balance accruals. In addition, the Supplemental Pension Plan may continue to be used to credit benefits for special pension agreements. Refer to “What are the health, welfare and pension benefits offered?” beginning on page 51.
 
(2) Refer to page 85 of Aetna’s 2010 Annual Report, Financial Report to Shareholders for a discussion of the valuation methods used to calculate the amounts in this column. In calculating the present value of the accumulated benefit under the Pension Plan and the Supplemental Pension Plan, the following economic assumptions were used:
 
                 
    Pension
  Supplemental
    Plan   Pension Plan
 
 
Discount Rate
    5.52 %     5.01 %
Future Cash Balance Interest Rate
    3.87 %     3.87 %
5-Year Average Cost of Living Adjustment
    2.30 %     2.30 %
 
 
 
(3) Includes $7,554,256 which represents the present value of the additional pension benefit provided to Mr. Williams pursuant to his employment agreement. Under his employment agreement, Mr. Williams received an additional fully vested pension accrual in an amount equal to his base salary for each of calendar years 2005 through 2010. This additional pension accrual will be offset by the value of Mr. Williams’ vested benefit under his prior employer’s pension plan. The remaining $1,934,924 represents the present value of Mr. Williams’ benefit under the Supplemental Pension Plan.
 
(4) Dr. Reisman is not eligible to participate in the Pension Plan or Supplemental Pension Plan because he joined the Company through its acquisition of Active Health Management, Inc.
 
Pension Plan Narrative
 
Prior to January 1, 2011, the Company provided the Pension Plan, a noncontributory, defined benefit pension plan, for most of its employees. In 1999, the Pension Plan was amended to convert the Pension Plan’s final average pay benefit formula to a cash balance design. Under this design, the pension benefit is expressed as a cash balance account. Each year through December 31, 2010, a participant’s cash balance account was credited with (i) a pension credit based on the participant’s age, years of service and eligible pay for that year, and (ii) an interest credit based on the participant’s account balance as of the beginning of the year and an interest rate that equals the average 30-year U.S. Treasury bond rate for October of the prior calendar year. For 2010, the interest rate was 4.19%. For purposes of the Pension Plan, eligible pay was generally base pay and certain other forms of cash compensation, including annual performance bonuses, but excluding long-term incentive compensation and proceeds from stock option and SAR exercises and other equity grants. The maximum eligible pay under the Pension Plan was set annually by the Internal Revenue Service and was $245,000 in 2010. Effective January 1, 2011, the Pension Plan was frozen. No further pension credits will be earned after this date. However, participants’ cash balance accounts will
 
 
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continue to be credited with the interest credit. Effective January 1, 2007, the pension credit was significantly reduced for all eligible employees to a maximum of 4%. Under the Pension Plan, benefits are paid over the lifetime of the employee (or the joint lives of the employee and his or her beneficiary) except that the employee may elect to take up to 50% of his or her benefits in a lump sum payment following termination of employment.
 
Employees with pension benefits as of December 31, 1998, including Mr. Casazza, are considered transition participants under the Pension Plan. Transition participants continued to accrue benefits under the Pension Plan’s final average pay formula until December 31, 2006. Under the final average pay formula, retirement benefits are calculated on the basis of (i) the number of years of credited service (maximum credit is 35 years) and (ii) the employee’s average annual earnings during the 60 consecutive months out of the last 180 months of service that yield the highest annual compensation. On termination of employment, the value of the December 31, 2006 cash balance account with interest is compared to the lump sum value of the benefit under the final average pay formula accrued through December 31, 2006, and the greater of these two amounts becomes the December 31, 2006 cash balance account value. Cash balance accruals after December 31, 2006, if any, are added to this amount to determine a participant’s total benefit. Mr. Casazza is the only Named Executive Officer considered a transition participant under the Pension Plan.
 
The Code limits the maximum annual benefit that may be accrued under and paid from a tax-qualified plan such as the Pension Plan. As a result, Aetna established the Supplemental Pension Plan, an unfunded, non-tax qualified supplemental pension plan that provides benefits (included in the amounts listed in the 2010 Pension Benefits Table beginning on page 62), that exceed the Code limit. The Supplemental Pension Plan also has been used to pay other pension benefits that were not otherwise payable under the Pension Plan, including additional years of credited service beyond years actually served, additional years of age, and covered compensation in excess of that permitted under the Pension Plan. Supplemental Pension Plan benefits are paid out in five equal annual installments commencing six months following termination of employment. As of January 1, 2007, the Supplemental Pension Plan is no longer used to accrue benefits that exceed the Code limits, but interest will continue to accrue on the outstanding cash balance accruals. In addition, the Supplemental Pension Plan may continue to be used to credit benefits for special pension agreements.
 
2010 Nonqualified Deferred Compensation Table
 
The following table sets forth information concerning compensation deferrals during 2010 by the Named Executive Officers.
 
                                 
 
    Executive
  Aggregate
      Aggregate
    Contributions
  Earnings
  Aggregate
  Balance
    in Last
  in Last FY
  Withdrawals/
  at Last FYE
Name   FY(1)   (2)   Distributions   (3)
 
 
Mark T. Bertolini
  $ 0     $ 57,456     $ 315,014     $ 1,442,439  
William J. Casazza
    49,813       35,991       0       960,881  
Margaret M. McCarthy
    235,782       (49,364 )     0       1,094,496  
Lonny Reisman, M.D. 
    0       0       0       0  
Joseph M. Zubretsky
    775,435       89,059       0       2,406,114  
Ronald A. Williams
    99,617       (1,483,248 )     0       24,383,648  
 
 
(1) The following table provides additional information about contributions by Named Executive Officers to their nonqualified deferred compensation accounts during 2010. Except for Ms. McCarthy and Mr. Zubretsky, the contributions during 2010 came from the base salary, annual bonus and/or RSUs that are reported for the Named Executive Officer in the “Salary,” “Non-Equity Incentive Plan Compensation” and/or “Stock Awards” columns of the 2010 Summary Compensation Table on page 56. All amounts contributed by a Named Executive Officer and by the Company in prior years have been reported in the Summary Compensation Tables in Aetna’s previously filed proxy statements in the year earned to the extent such person was a named executive officer for purposes of the SEC’s executive compensation disclosure.
 
 
 
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            2010 Cash
   
    2010 Stock
  2010 Cash
  Contributions into
   
    Contributions into
  Contributions into
  Supplemental
  Total 2010
    Stock Unit Account   Interest Account   401(k) Plan   Contributions
 
 
Mark T. Bertolini
  $ 0     $ 0     $ 0     $ 0  
William J. Casazza
    0       0       49,813       49,813  
Margaret M. McCarthy
    235,782 (a)     0       0       235,782  
Lonny Reisman, M.D. 
    0       0       0       0  
Joseph M. Zubretsky
    0       775,435 (b)     0       775,435  
Ronald A. Williams
    0       99,617       0       99,617  
 
 
 
(a) On October 17, 2007, the Compensation Committee granted Ms. McCarthy a cash award of $450,000. The award vests in a stock unit account in increments of 10% per year, on each of October 17, 2008, 2009, 2010, 2011 and 2012; and the remaining 50% will vest on October 17, 2014. In addition, on April 25, 2008, the Compensation Committee granted Ms. McCarthy a retention RSU award of $936,029, which she elected to defer. This grant vests in increments of 33% per year for three years, beginning on April 28, 2009. If Ms. McCarthy’s employment is involuntarily terminated by the Company other than for cause, the unvested RSU award will be forfeited and the cash award will be prorated as of her termination date. The vested amount of each of these grants will be paid to Ms. McCarthy six months following her termination of employment with the Company.
 
(b) In recognition of Mr. Zubretsky’s forfeiture of his supplemental executive retirement plan from his previous employer, the Company established a $2,800,000 deferred compensation interest account for him upon the commencement of his employment with the Company. That account is credited with interest at the same rate as the fixed interest rate fund option of the Company’s 401(k) Plan. That account, together with accrued interest thereon, vested over four years, and fully vested on February 11, 2011, the fourth anniversary of Mr. Zubretsky’s date of hire. The vested amount will be paid to Mr. Zubretsky six months following his termination of employment with the Company.
 
(2) The following table details the aggregate earnings on nonqualified deferred compensation accrued to each Named Executive Officer during 2010.
 
                                         
    Appreciation
      Dividend
       
    (Depreciation)
      Equivalents on
  Interest on
   
    on Stock
  Earnings on
  Stock Unit
  Supplemental
   
    Unit Account   Interest Account   Account   401(k) Plan   Total
 
 
Mark T. Bertolini
  $ 0     $ 52,241     $ 0     $ 5,215     $ 57,456  
William J. Casazza
    0       1,109       0       34,882       35,991  
Margaret M. McCarthy
    (59,197 )     0       1,142       8,691       (49,364 )
Lonny Reisman, M.D. 
    0       0       0       0       0  
Joseph M. Zubretsky
    0       89,059       0       0       89,059  
Ronald A. Williams
    (1,737,739 )     178,699       24,228       51,564       (1,483,248 )
 
 
 
(3) The aggregate nonqualified deferred compensation account balances of each Named Executive Officer at December 31, 2010 consist of the following:
 
                                 
            Supplemental 401(k)
   
    Stock Unit Account   Interest Account   Plan Account   Total
 
 
Mark T. Bertolini
  $ 0     $ 1,306,829     $ 135,610     $ 1,442,439  
William J. Casazza
    0       28,324       932,557       960,881  
Margaret M. McCarthy
    868,725       0       225,771       1,094,496  
Lonny Reisman, M.D. 
    0       0       0       0  
Joseph M. Zubretsky
    0       2,406,114       0       2,406,114  
Ronald A. Williams
    18,426,033       4,616,679       1,340,936       24,383,648  
 
 
 
Deferred Compensation Narrative
 
The “Salary” and “Non-Equity Incentive Plan Compensation” columns in the 2010 Summary Compensation Table include cash compensation that was deferred by the Named Executive Officers during 2010. The Company permits executives to defer up to 20% of eligible pay (which includes base salary and annual bonus) into the 401(k) Plan (subject to deferral limits established by the Code — in 2010,
 
 
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$16,500 and $22,000 for individuals age 50 and older). The 401(k) Plan, which is available to all eligible employees of the Company, is a funded arrangement that provides eighteen investment options, as well as a self-managed brokerage option. For most of 2010, Aetna matched 50% of the amount deferred by employees, including the Named Executive Officers, under the 401(k) Plan up to 3% of eligible pay. Effective October 4, 2010, Aetna increased the match to 100% of the amount deferred by employees, including the Named Executive Officers, under the 401(k) Plan up to 6% of eligible pay. Under the 401(k) Plan, benefits are paid to the executive after termination of employment on the date selected by the executive.
 
Aetna established the Supplemental 401(k) Plan to provide the deferral that would have been credited to the 401(k) Plan but for limits imposed by the Employee Retirement Income Security Act of 1974 and the Code. The Supplemental 401(k) Plan allows eligible employees to defer up to an additional 10% of base salary. Aetna does not match employees’ contributions to the Supplemental 401(k) Plan. The Supplemental 401(k) Plan is an unfunded plan that credits interest at a fixed rate pursuant to a formula equal to the rate of interest paid from time to time under the fixed interest rate fund option of the 401(k) Plan. In 2010, this fixed interest rate was 4.10% from January to June and 3.90% from July to December. In 2011, this fixed interest rate is 3.90% from January to June. Under the Supplemental 401(k) Plan, benefits are paid to the executive on the later of six months or January 1 following termination of employment. Further, the Company permits executives to defer up to 100% of their annual bonus. The deferral arrangement for annual bonuses is also unfunded and permits investment in either an interest account or a stock unit account. The interest account credits the same interest as the Supplemental 401(k) Plan. The stock unit account tracks the value of the Common Stock and earns dividend equivalents, but is paid in cash. This arrangement pays out on a date selected by the executive at the time of deferral. The Compensation Committee may also require or permit other compensation to be deferred. For example, the Compensation Committee has required Mr. Williams to defer base salary over $1 million to an interest account to comply with current provisions of Section 162(m) of the Code.
 
Potential Post-Employment Payments
 
Regardless of the manner in which a Named Executive Officer’s employment terminates, he or she is entitled to receive certain amounts earned during his or her term of employment, including the following: (a) deferred compensation amounts; (b) amounts accrued and vested through the 401(k) Plan and Supplemental 401(k) Plan; and (c) amounts accrued and vested through the Pension Plan and Supplemental Pension Plan. In addition, except as provided in the tables below, each Named Executive Officer is eligible to receive vested equity awards upon a termination of employment for any reason (other than for cause). Equity awards continue to vest except for PSUs and MSUs for all employees during any period of severance or salary continuation. The actual amounts paid to any Named Executive Officer can only be determined at the time of the executive’s separation from the Company. Section 409A of the Code may require the Company to delay the payment of certain payments for six months following termination of employment. Refer to “2010 Nonqualified Deferred Compensation Table” and “Deferred Compensation Narrative” beginning on page 64 for a discussion of the deferred compensation plan, 401(k) Plan and Supplemental 401(k) Plan. Refer to “2010 Pension Benefits Table” and “Pension Plan Narrative” beginning on page 62 for a discussion of the Pension Plan and Supplemental Pension Plan. Refer to “Outstanding Equity Awards at 2010 Fiscal Year-End Table” on page 60 for a discussion of the outstanding equity awards at December 31, 2010.
 
Our agreement with Mr. Zubretsky provides that the Company will make him whole for certain excise taxes that may apply under Sections 280G and 4999 of the Code for payments made in connection with a change in control. SEC regulations require an estimate of these amounts, for purposes of the following tables, assuming that the change in control and termination of employment occurred on December 31, 2010, and using the market price of our Common Stock on that day. Using these assumed facts, these provisions produce no hypothetical payment to Mr. Zubretsky. Any payments that may actually be owed to Mr. Zubretsky under these provisions will be highly dependent upon the actual facts applicable to the
 
 
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change in control transaction and termination of employment, and can be accurately estimated only when such facts are known.
 
Each of the tables for the Named Executive Officers below assumes a termination of employment (or change in control and termination of employment without Cause and/or for Good Reason, as defined below, as applicable) as of December 31, 2010, and assumes a Common Stock price of $30.51 per share (the closing price of our Common Stock on December 31, 2010) and, for illustrative purposes, an immediate sale of equity awards upon termination of employment at $30.51 per share. Change in control severance benefits (base salary and bonus payments) to each Named Executive Officer are paid pursuant to a “double-trigger,” which means that to receive such benefits employment must terminate both: (1) as a result of a qualifying termination of employment, and (2) after a change in control as detailed in the agreements described below and under “Agreements with Named Executive Officers” beginning on page 74.
 
The amounts set forth in the tables that follow under “PSUs” were calculated assuming that the Company performs at maximum performance for the 2010-2011 performance period and, for “Termination after Change-in-Control,” at target for the 2009-2010 performance period. Based on the Company’s full year 2010 results, the Compensation Committee determined that the 2010-2011 PSUs performed at the maximum level, and they will continue to vest until February 8, 2012. The 2009-2010 PSUs were cancelled without payment because the Compensation Committee determined that the performance goal for that award was not met.
 
As of December 31, 2010, Messrs. Williams, Bertolini and Casazza and Dr. Reisman were considered retirement eligible for purposes of equity vesting. As a result, SARs previously granted to these Named Executive Officers are subject to additional vesting pursuant to the terms of their equity award agreements and/or their employment agreements. This additional vesting is included in the equity awards in the tables that follow for each of these Named Executive Officers.
 
Mark T. Bertolini
 
The following table reflects additional payments that would be made to Mr. Bertolini upon termination of his employment on December 31, 2010, under various scenarios. Mr. Bertolini’s employment agreement defines “Cause” as the occurrence of one or more of the following: (a) a willful and continued failure to attempt in good faith to perform duties, which failure is not remedied within fifteen business days following written notice of such failure; (b) material gross negligence or willful malfeasance in performance of duties; (c) with respect to the Company, commission of an act constituting fraud, embezzlement or any other act constituting a felony; or (d) commission of any act constituting a felony which has or is likely to have a material adverse economic or reputational impact on the Company. Mr. Bertolini’s employment agreement defines “Good Reason” as the occurrence of one or more of the following: (a) a reduction by the Company of base salary or total Target Cash Bonus Opportunity (except in the event of a ratable reduction prior to a change in control affecting all senior officers of the Company); (b) within twenty-four months following a change of control, a reduction in the level of the long-term incentive plan opportunity from that afforded him immediately prior to the change in control; (c) any failure of a successor of the Company to assume and agree to perform the Company’s entire obligations under the employment agreement; (d) reporting to any person other than the Company’s Board of Directors; (e) any action or inaction by the Company that constitutes a material breach of the employment agreement; (f) removal of Mr. Bertolini as President, Chief Executive Officer or Director; or (g) the appointment of any person to the position of executive Chairman after Mr. Bertolini becomes Chairman. Mr. Bertolini’s equity award agreements define “Change in Control” as the occurrence of any of the following events: (a) a person or group acquires 20% or more of the combined voting power of the Company’s then outstanding securities; (b) during any period of 24 consecutive months, the individuals who, at the beginning of such period, constitute the Board cease for any reason (other than death) to constitute a majority of the Board, unless any such new Director was elected, recommended or approved by at least two-thirds of the other Directors then in office; or (c) a transaction requiring shareholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary of the Company through the purchase of assets, or by merger, or otherwise. Mr. Bertolini’s employment agreement contains a change in control cutback policy which, under certain circumstances,
 
 
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would reduce the amount due to Mr. Bertolini following a change in control to an amount that maximizes the net after tax amount retained by him to the extent permitted under Section 409A of the Code.
 
                                         
   
          Termination by
                   
    Retirement or
    Aetna without
                   
    Voluntary
    Cause or by
    Termination
    Termination
       
    Termination by
    Mr. Bertolini for
    after Change-
    by Aetna
    Death or
 
Payment Type   Mr. Bertolini     Good Reason     in-Control     for Cause     Disability  
   
 
Base Salary
  $ 0     $ 2,000,000 (1)   $ 2,000,000 (1)   $ 0     $ 0  
Bonus
    0       3,600,000 (1)     3,600,000 (1)     0       0  
Long-term Incentive
                                       
SARs
    0 (2)     0 (2)     0 (9)     0 (10)     0 (11)
RSUs
    0 (3)     3,483,967 (6)     3,483,967 (9)     0 (10)     3,483,967 (6)
MSUs
    1,503,735 (4)     3,608,952 (7)     3,608,952 (9)     0 (10)     3,608,952 (7)
PSUs
    2,055,123 (5)     4,110,246 (8)     5,678,033 (9)     0 (10)     4,110,246 (8)
                                         
Total
  $ 3,558,858     $ 16,803,165     $ 18,370,952     $ 0     $ 11,203,165  
 
 
(1) Represents 24 months of cash compensation (calculated as annual base salary and target cash bonus opportunity) plus a pro rata portion of Mr. Bertolini’s target cash bonus opportunity for the year in which termination of employment occurs. Amounts would be paid bi-weekly during the severance period.
 
(2) Represents full accelerated vesting of a SAR grant awarded February 8, 2008 and partial accelerated vesting of a SAR grant awarded February 13, 2009. These SARs have no intrinsic value as of December 31, 2010 because the exercise price was above the closing price of the Common Stock on that date.
 
(3) No accelerated vesting pursuant to a RSU grant awarded February 13, 2009.
 
(4) Represents pro-rated vesting of a MSU grant awarded February 8, 2010. Actual payment would occur following February 8, 2012, in shares of Common Stock, net of taxes, based on the average closing price of the Common Stock for the final 30 trading day period ending on the February 8, 2012, vesting date, which is assumed to be $30.51.
 
(5) Represents pro-rated vesting of PSU grants awarded February 8, 2010 and November 29, 2010. Actual payment would occur following February 8, 2012 and November 29, 2012. The Compensation Committee has determined that these PSUs performed at the maximum level.
 
(6) Represents full accelerated vesting of a RSU grant awarded February 13, 2009.
 
(7) Represents full accelerated vesting of a MSU grant awarded February 8, 2010. Actual payment would occur following February 8, 2012, in shares of Common Stock, net of taxes, based on the average closing price of the Common Stock for the final 30 trading day period ending on the February 8, 2012, vesting date, which is assumed to be $30.51.
 
(8) Represents full accelerated vesting of PSU grants awarded February 8, 2010 and November 29, 2010. Actual payment would occur following February 8, 2012 and November 29, 2012, respectively. The Compensation Committee has determined that these PSUs performed at the maximum level.
 
(9) Represents full accelerated vesting of all outstanding unvested equity awards. PSUs would vest at the greater of the performance target or actual Company performance as of the date of the Change in Control (as defined in Mr. Bertolini’s equity award agreements). MSUs would vest as of the date of the Change in Control. MSU value assumes the average closing price of the Common Stock for the final 30 trading days of the vesting period is $30.51.
 
(10) Vested and unvested options and SARs and unvested RSUs, PSUs and MSUs are subject to forfeiture if there is a termination by Aetna for Cause (as defined in Mr. Bertolini’s employment agreement).
 
(11) Represents full accelerated vesting of all outstanding unvested SARs. All awarded SARs have no intrinsic value as of December 31, 2010 because the exercise price was above the closing price of the Common Stock on that date.
 
William J. Casazza
 
The following table reflects additional payments that would be made to Mr. Casazza upon termination of his employment on December 31, 2010, under various scenarios. Mr. Casazza’s equity award agreements define “Change in Control” as the occurrence of any of the following events: (a) a person or group acquires 20% or more of the combined voting power of the Company’s then outstanding securities; (b) during any period of 24 consecutive months, the individuals who, at the beginning of such period, constitute the Board cease for any reason (other than death) to constitute a majority of the Board, unless any such new Director was elected, recommended or approved by at least two-thirds of the other Directors then in office; or (c) a transaction
 
 
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requiring shareholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary of the Company through the purchase of assets, or by merger, or otherwise.
 
                                         
 
    Retirement or
               
    Voluntary
  Termination by
  Termination
  Termination
   
    Termination by
  Aetna without
  after Change-
  by Aetna
  Death or
Payment Type   Mr. Casazza   Cause   in-Control   for Cause   Disability
 
 
Base Salary
  $ 0     $ 500,045 (1)   $ 500,045 (1)   $ 0     $ 0  
Bonus
    0       0       0       0       0  
Long-term Incentive
                                       
SARs
    0 (2)     0 (2)     0 (6)     0 (7)     0 (8)
RSUs
    302,171 (3)     302,202 (3)     805,800 (6)     0 (7)     805,800 (9)
MSUs
    574,162 (4)     574,162 (4)     1,377,956 (6)     0 (7)     574,162 (4)
PSUs
    658,284 (5)     658,284 (5)     1,915,204 (6)     0 (7)     658,284 (5)
                                         
Total
  $ 1,534,617     $ 2,034,693     $ 4,599,005     $ 0     $ 2,038,246  
 
 
(1) Represents 52 weeks of base salary continuation. Amounts would be paid bi-weekly during the severance period.
 
(2) Represents full accelerated vesting of a SAR grant awarded February 8, 2008 and partial accelerated vesting of a SAR grant awarded February 13, 2009. These SARs have no intrinsic value as of December 31, 2010 because the exercise price was above the closing price of the Common Stock on that date.
 
(3) Represents partial accelerated vesting of a RSU grant awarded March 10, 2009.
 
(4) Represents pro-rated vesting of a MSU grant awarded February 8, 2010. Actual payment would occur following February 8, 2012, in shares of Common Stock, net of taxes, based on the average closing price of the Common Stock for the final 30 trading day period ending on the February 8, 2012, vesting date, which is assumed to be $30.51.
 
(5) Represents pro-rated vesting of a PSU grant awarded February 8, 2010. Actual payment would occur following February 8, 2012. The Compensation Committee has determined that these PSUs performed at the maximum level.
 
(6) Represents full accelerated vesting of all outstanding unvested equity awards. PSUs would vest at the greater of the performance target or actual Company performance as of the date of the Change in Control (as defined in Mr. Casazza’s equity award agreements). MSUs would vest as of the date of the Change in Control. MSU value assumes the average closing price of the Common Stock for the final 30 trading days of the vesting period is $30.51.
 
(7) Vested and unvested options and SARs and unvested RSUs, PSUs and MSUs are subject to forfeiture if there is a termination by Aetna for cause.
 
(8) Represents full accelerated vesting of all outstanding unvested SARs. All awarded SARs have no intrinsic value as of December 31, 2010 because the exercise price was above the closing price of the Common Stock on that date.
 
(9) Represents full accelerated vesting of a RSU grant awarded March 10, 2009.
 
Margaret M. McCarthy
 
The following table reflects additional payments that would be made to Ms. McCarthy upon termination of her employment on December 31, 2010, under various scenarios. Ms. McCarthy’s equity award agreements define “Change in Control” as the occurrence of any of the following events: (a) a person or group acquires 20% or more of the combined voting power of the Company’s then outstanding securities; (b) during any period of 24 consecutive months, the individuals who, at the beginning of such period, constitute the Board cease for any reason (other than death) to constitute a majority of the Board, unless any such new Director was elected, recommended or approved by at least two-thirds of the other Directors then in office; or (c) a
 
 
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transaction requiring shareholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary of the Company through the purchase of assets, or by merger, or otherwise.
 
                                         
 
    Retirement or
               
    Voluntary
  Termination by
  Termination
  Termination
   
    Termination by
  Aetna without
  after Change-
  by Aetna
  Death or
Payment Type   Ms. McCarthy   Cause   in-Control   for Cause   Disability
 
 
Base Salary
  $ 0     $ 392,308 (1)   $ 0     $ 0     $ 0  
Bonus
    0       0       0       0       0  
Long-term Incentive
                                       
SARs
    0       0 (2)     0 (6)     0 (7)     0 (8)
RSUs
    0       439,100 (3)     1,217,135 (6)     0 (7)     1,217,135 (9)
MSUs
    0       710,856 (4)     1,706,048 (6)     0 (7)     710,856 (4)
PSUs
    0       815,014 (5)     2,228,664 (6)     0 (7)     815,014 (5)
                                         
Total
  $ 0     $ 2,357,278     $ 5,151,847     $ 0     $ 2,743,005  
 
 
(1) Represents 34 weeks of base salary continuation. Amounts would be paid bi-weekly during the severance period.
 
(2) Represents full accelerated vesting of a SAR grant awarded February 8, 2008. Unvested SARs granted on February 13, 2009 are subject to forfeiture. These SARs have no intrinsic value as of December 31, 2010 because the exercise price was above the closing price of the Common Stock on that date.
 
(3) Represents partial accelerated vesting of RSU grants awarded April 25, 2008 and December 2, 2010 in accordance with Ms. McCarthy’s equity award agreements.
 
(4) Represents pro-rated vesting of a MSU grant awarded February 8, 2010. Actual payment would occur following February 8, 2012, in shares of Common Stock, net of taxes, based on the average closing price of the Common Stock for the final 30 trading day period ending on the February 8, 2012, vesting date, which is assumed to be $30.51.
 
(5) Represents pro-rated vesting of a PSU grant awarded February 8, 2010. Actual payment would occur following February 8, 2012. The Compensation Committee has determined that these PSUs performed at the maximum level.
 
(6) Represents full accelerated vesting of all outstanding unvested equity awards. PSUs would vest at the greater of the performance target or actual Company performance as of the date of the Change in Control (as defined in Ms. McCarthy’s equity award agreements). MSUs would vest as of the date of the Change in Control. MSU value assumes the average closing price of the Common Stock for the final 30 trading days of the vesting period is $30.51.
 
(7) Vested and unvested options and SARs and unvested RSUs, PSUs and MSUs are subject to forfeiture if there is a termination by Aetna for cause.
 
(8) Represents full accelerated vesting of all outstanding unvested SARs. All awarded SARs have no intrinsic value as of December 31, 2010 because the exercise price was above the closing price of the Common Stock on that date.
 
(9) Represents full accelerated vesting of RSU grants awarded April 25, 2008 and December 2, 2010.
 
Lonny Reisman, M.D.
 
The following table reflects additional payments that would be made to Dr. Reisman upon termination of his employment on December 31, 2010, under various scenarios. Dr. Reisman’s agreement defines “Good Reason” as the occurrence of one or more of the following: (a) a breach by the Company of any material terms of the agreement; (b) a relocation of the Company’s principal executive officers; (c) a material diminution of Dr. Reisman’s duties and responsibilities; or (d) a material diminution of Dr. Reisman’s base salary and bonus opportunities or employee benefits. Dr. Reisman’s equity award agreements define “Change in Control” as the occurrence of any of the following events: (a) a person or group acquires 20% or more of the combined voting power of the Company’s then outstanding securities; (b) during any period of 24 consecutive months, the individuals who, at the beginning of such period, constitute the Board cease for any reason (other than death) to constitute a majority of the Board, unless any such new Director was elected, recommended or approved by at least two-thirds of the other Directors then in office; or (c) a transaction
 
 
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requiring shareholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary of the Company through the purchase of assets, or by merger, or otherwise.
 
                                         
 
        Termination by
           
    Retirement or
  Aetna without
           
    Voluntary
  Cause or by Dr.
  Termination
  Termination
   
    Termination by
  Reisman for Good
  after Change-
  by Aetna
  Death or
Payment Type   Dr. Reisman   Reason   in-Control   for Cause   Disability
 
 
Base Salary
  $ 0     $ 550,000 (1)   $ 550,000 (1)   $ 0     $ 0  
Bonus
    0       440,000 (1)     440,000 (1)     0       0  
Long-term Incentive
                                       
SARs
    372,308 (2)     372,308 (2)     372,308 (5)     0 (6)     372,308 (7)
MSUs
    437,467 (3)     437,467 (3)     1,049,895 (5)     0 (6)     437,467 (3)
PSUs
    501,554 (4)     501,554 (4)     1,430,705 (5)     0 (6)     501,554 (4)
                                         
Total
  $ 1,311,329     $ 2,301,329     $ 3,842,908     $ 0     $ 1,311,329  
 
 
(1) Represents 52 weeks of base salary continuation and annual bonus at target. Amounts would be paid bi-weekly during the severance period.
 
(2) Represents full accelerated vesting of SAR grants awarded February 8, 2008 and November 12, 2008 and partial accelerated vesting of a SAR grant awarded February 13, 2009. The SAR grant awarded November 12, 2008 is the only SAR grant that has intrinsic value as of December 31, 2010 because the exercise price was below the closing price of the Common Stock on that date.
 
(3) Represents pro-rated vesting of a MSU grant awarded February 8, 2010. Actual payment would occur following February 8, 2012, in shares of Common Stock, net of taxes, based on the average closing price of the Common Stock for the final 30 trading day period ending on the February 8, 2012, vesting date, which is assumed to be $30.51.
 
(4) Represents pro-rated vesting of a PSU grant awarded February 8, 2010. Actual payment would occur following February 8, 2012. The Compensation Committee has determined that these PSUs performed at the maximum level.
 
(5) Represents full accelerated vesting of all outstanding unvested equity awards. PSUs would vest at the greater of the performance target or actual Company performance as of the date of the Change in Control (as defined in Dr. Reisman’s equity award agreements). MSUs would vest as of the date of the Change in Control. MSU value assumes the average closing price of the Common Stock for the final 30 trading days of the vesting period is $30.51.
 
(6) Vested and unvested options and SARs and unvested RSUs, PSUs and MSUs are subject to forfeiture if there is a termination by Aetna for cause.
 
(7) Represents full accelerated vesting of all outstanding unvested SARs.
 
Joseph M. Zubretsky
 
The following table reflects additional payments that would be made to Mr. Zubretsky upon termination of his employment on December 31, 2010, under various scenarios. Mr. Zubretsky’s agreement defines “Cause” as the occurrence of one or more of the following: (a) a willful and continued failure to attempt in good faith to perform duties, which failure is not remedied within 15 business days following notice of such failure; (b) material gross negligence or willful malfeasance in performance of duties; (c) with respect to the Company, a conviction for fraud, embezzlement or any other felony; or (d) a conviction of a felony which has or is likely to have a material adverse economic or reputational impact on the Company. Under Mr. Zubretsky’s agreement, “Change in Control” means the occurrence or the expected occurrence of a change in “the ownership or effective control” of Aetna or “the ownership of a substantial portion of the assets” of Aetna within the meaning of Section 280(g) of the Code. Certain of Mr. Zubretsky’s equity award agreements define “Change in Control” as the occurrence of any of the following events: (a) a person or group acquires 20% or more of the combined voting power of the Company’s then outstanding securities; (b) during any period of 24 consecutive months, the individuals who, at the beginning of such period, constitute the Board cease for any reason (other than death) to constitute a majority of the Board, unless any such new Director was elected, recommended or approved by at least two-thirds of the other Directors then in office; or (c) a transaction requiring shareholder approval for the acquisition of the Company by an entity
 
 
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other than the Company or a subsidiary of the Company through the purchase of assets, or by merger, or otherwise.
 
                                         
 
    Retirement or
               
    Voluntary
  Termination by
  Termination
  Termination
   
    Termination by
  Aetna
  after Change-
  by Aetna
  Death or
Payment Type   Mr. Zubretsky   without Cause   in-Control   for Cause   Disability
 
 
Base Salary
  $ 0     $ 800,000 (1)   $ 800,000 (1)   $ 0     $ 0  
Bonus
    0       800,000 (1)     800,000 (1)     0       0  
Payment Related to Tax Regulation
    0       0       0       0       0  
Long-term Incentive
                                       
SARs
    0       0 (2)     0 (6)     0 (7)     0 (8)
RSUs
    0       3,074,005 (3)     4,407,780 (6)     0 (7)     4,407,780 (9)
MSUs
    0       1,038,948 (4)     2,493,438 (6)     0 (7)     1,038,948 (4)
PSUs
    0       1,191,171 (5)     3,465,539 (6)     0 (7)     1,191,171 (5)
                                         
Total
  $ 0     $ 6,904,124     $ 11,966,757     $ 0     $ 6,637,899  
 
 
(1) Represents 52 weeks of base salary and annual bonus at 100% of base salary. Amounts would be paid bi-weekly during the severance period.
 
(2) Represents full accelerated vesting a SAR grant awarded February 8, 2008. Unvested SARs granted on February 13, 2009 are subject to forfeiture. These SARs have no intrinsic value as of December 31, 2010 because the exercise price was above the closing price of the Common Stock on that date.
 
(3) Represents full accelerated vesting of a RSU grant awarded February 13, 2009 and partial vesting of a RSU grant awarded December 2, 2010 in accordance with Mr. Zubretsky’s equity award agreements.
 
(4) Represents pro-rated vesting of a MSU grant awarded February 8, 2010. Actual payment would occur following February 8, 2012, in shares of Common Stock, net of taxes, based on the average closing price of the Common Stock for the final 30 trading day period ending on the February 8, 2012, vesting date, which is assumed to be $30.51.
 
(5) Represents pro-rated vesting of a PSU grant awarded February 8, 2010. Actual payment would occur following February 8, 2012. The Compensation Committee has determined that these PSUs performed at the maximum level.
 
(6) Represents full accelerated vesting of all outstanding unvested equity awards. PSUs would vest at the greater of the performance target or actual Company performance as of the date of the Change in Control (as defined in Mr. Zubretsky’s equity award agreements). MSUs would vest as of the date of the Change in Control. MSU value assumes the average closing price of the Common Stock for the final 30 trading days of the vesting period is $30.51.
 
(7) Vested and unvested SARs and unvested RSUs, MSUs and PSUs are subject to forfeiture if there is a termination by Aetna for Cause (as defined in Mr. Zubretsky’s agreement).
 
(8) Represents full accelerated vesting of all outstanding unvested SARs. All awarded SARs have no intrinsic value as of December 31, 2010 because the exercise price was above the closing price of the Common Stock on that date.
 
(9) Represents full accelerated vesting of RSU grants awarded February 13, 2009 and December 2, 2010.
 
Ronald A. Williams
 
The following table reflects additional payments that would be made to Mr. Williams upon termination of his employment on December 31, 2010, under various scenarios. Mr. Williams retired from the Company and the Board on April 8, 2011. Mr. Williams’ employment agreement defines “Cause” as the occurrence of one or more of the following: (a) a willful and continued failure to attempt in good faith to perform duties, which failure is not remedied within 15 business days following written notice of such failure; (b) material gross negligence or willful malfeasance in performance of duties; (c) with respect to the Company, commission of an act constituting fraud, embezzlement or any other act constituting a felony; or (d) commission of any act constituting a felony which has or is likely to have a material adverse economic or reputational impact on the Company. Mr. Williams’ employment agreement defines “Good Reason” as the occurrence of one or more of the following: (a) removal as a Director of the Company other than in connection with a termination for Cause (other than regulatory requirements limiting the number of executives serving on the Board); (b) a reduction by the Company of base salary or total annual target cash compensation (except in the event of a
 
 
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ratable reduction affecting all senior officers of the Company); or (c) any failure of a successor of the Company to assume and agree to perform the Company’s entire obligations under the employment agreement. Mr. Williams’ employment agreement and his equity award agreements define “Change in Control” as the occurrence of any of the following events: (a) a person or group acquires 20% or more of the combined voting power of the Company’s then outstanding securities; (b) during any period of 24 consecutive months, the individuals who, at the beginning of such period, constitute the Board cease for any reason (other than death) to constitute a majority of the Board, unless any such new Director was elected, recommended or approved by at least two-thirds of the other Directors then in office; or (c) a transaction requiring shareholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary of the Company through the purchase of assets, or by merger, or otherwise. The terms of Mr. Williams’ consulting agreement, which commenced upon his retirement, are not reflected in the following table because it could not become effective prior to April 2011. The services Mr. Williams provides to Aetna Foundation, Inc. under his consulting agreement will constitute continued service with the Company under the existing terms of certain of Mr. Williams’ equity award agreements.