OVERVIEW

We are one of the nation's leading diversified health care benefits companies, serving approximately 37.2 million people with information and resources to help them make better informed decisions about their health care. We offer a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities and health care management services for Medicaid plans. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, governmental units, government-sponsored plans, labor groups and expatriates. Our operations are conducted in three business segments: Health Care, Group Insurance and Large Case Pensions.

The following MD&A provides a review of our financial condition at September 30, 2008 and December 31, 2007 and results of operations for the three and nine months ended September 30, 2008 and 2007. This Overview should be read in conjunction with the entire MD&A, which contains detailed information that is important to understanding our results of operations and financial condition, the consolidated financial statements and other data presented herein as well as the MD&A contained in our 2007 Annual Report on Form 10-K (our "2007 Annual Report"). This Overview is qualified in its entirety by the full MD&A.

Summarized Results for the Three and Nine Months Ended September 30, 2008 and 2007:

                                         Three Months Ended             Nine Months Ended
                                            September 30,                 September 30,
(Millions)                                  2008           2007           2008           2007
Revenue:
 Health Care                          $  7,132.5     $  6,280.4     $ 21,424.0     $ 18,322.6
 Group Insurance                           393.6          526.2        1,372.3        1,602.8
 Large Case Pensions                        98.5          154.7          395.1          529.8
Total revenue                            7,624.6        6,961.3       23,191.4       20,455.2
Net income                                 277.3          496.7        1,189.4        1,382.6
Operating earnings: (1)
 Health Care                               520.0          488.6        1,435.5        1,331.3
 Group Insurance                            47.2           38.2          121.4          108.5
 Large Case Pensions                         8.8            9.2           27.2           26.7

(1) Our discussion of operating results for our reportable business segments is based on operating earnings, which is a non-GAAP measure of net income (the term "GAAP" refers to U.S. generally accepted accounting principles). Refer to Segment Results and Use of Non-GAAP Measures in this MD&A on page 24 for a discussion of non-GAAP measures. Refer to pages 25, 29 and 30 for a reconciliation of operating earnings to net income for Health Care, Group Insurance and Large Case Pensions, respectively.

Our operating earnings for the three and nine months ended September 30, 2008, compared to the corresponding periods in 2007, reflect continued growth in our Health Care business. The increase in our operating earnings primarily reflects growth in revenue from increases in membership levels (refer to Health Care membership on page 27) and premium rates for renewing membership in 2008 and solid underwriting results partially offset by lower net investment income. We experienced membership growth in both our Insured (where we assume all or a majority of risk for health care costs) and our administrative services contract ("ASC") (where the plan sponsor assumes all or a majority of the risk for health care costs) medical products. At September 30, 2008, we served approximately 17.7 million medical members (consisting of approximately 34% Insured members and 66% ASC members), 14.1 million dental members and 11.1 million pharmacy members.

Net income for the three months ended September 30, 2008 includes after tax net realized capital losses of $232 million, reflecting approximately $120 million of yield-related other-than-temporary impairments ("OTTI") and approximately $70 million of credit-related OTTI of debt securities. Refer to Net Realized Capital Gains and Losses beginning on page 33 for additional information.

We continued to generate strong cash flows from operations in 2008. We also continued our share repurchase program during the nine months ended September 30, 2008, repurchasing approximately 38 million shares of our common stock at a cost of approximately $1.7 billion.

Board of Directors Update
Richard J. Harrington was appointed to our Board of Directors ("Board") in September 2008. Mr. Harrington is chairman of the Thomson Reuters Foundation. He also serves on our Board's Audit Committee and Investment and Finance Committee. With the addition of Mr. Harrington, the Board consists of thirteen directors.

Management Update
Rajan Parmeswar, Vice President, Controller and Chief Accounting Officer, joined Aetna in August 2008 and succeeded Ronald M. Olejniczak, who retired in July 2008.

Gery J. Barry, Chief Strategy Officer, joined Aetna in August 2008.

Segment Results and Use of Non-GAAP Measures in this Document The discussion of our results of operations that follows is presented based on our reportable segments in accordance with Statement of Financial Accounting Standards ("FAS") No. 131 "Disclosures about Segments of an Enterprise and Related Information," and is consistent with our segment disclosure included in Note 13 of the Condensed Notes to Consolidated Financial Statements on page
17. Each segment's discussion of results is based on operating earnings, which is the measure reported to our Chief Executive Officer for purposes of assessing the segment's financial performance and making operating decisions, such as allocating resources to the segment. Our operations are conducted in three business segments: Health Care, Group Insurance and Large Case Pensions.

Our discussion of the results of operations of each business segment is based on operating earnings, which exclude realized capital gains and losses as well as other items, if any, from net income reported in accordance with GAAP. We believe excluding realized capital gains and losses from net income to arrive at operating earnings provides more useful information about our underlying business performance. Net realized capital gains and losses arise from various types of transactions, primarily in the course of managing a portfolio of assets that support the payment of liabilities; however these transactions do not directly relate to the underwriting or servicing of products for our customers and are not directly related to the core performance of our business operations. We also may exclude other items that do not relate to the ordinary course of our business from net income to arrive at operating earnings. In each segment discussion below, we present a table that reconciles operating earnings to net income reported in accordance with GAAP. Each table details the net realized capital gains and losses and any other items excluded from net income, and the footnotes to each table describe the nature of each other item and why we believe it is appropriate to exclude that item from net income in calculating operating earnings.

HEALTH CARE

Health Care consists of medical, pharmacy benefits management, dental and vision plans offered on both an Insured basis and an ASC basis. Medical products include point-of-service ("POS"), preferred provider organization ("PPO"), health maintenance organization and indemnity benefit plans. Medical products also include health savings accounts ("HSAs") and Aetna HealthFundŽ, consumer-directed health plans that combine traditional POS or PPO and/or dental coverage, subject to a deductible, with an accumulating benefit account. We also offer Medicare and Medicaid products and services and specialty products, such as medical management and data analytics services, behavioral health plans and stop loss insurance, as well as products that provide access to our provider network in select markets.

Operating Summary for the Three and Nine Months Ended September 30, 2008 and 2007:

                                         Three Months Ended             Nine Months Ended
                                            September 30,                 September 30,
(Millions)                                  2008           2007           2008           2007
Premiums:
 Commerical (1)                       $  5,086.6     $  4,720.9     $ 14,924.4     $ 13,831.1
 Medicare                                1,209.9          634.8        3,631.7        1,964.0
 Medicaid                                  154.3           89.7          437.1          121.6
Total premiums                           6,450.8        5,445.4       18,993.2       15,916.7
Fees and other revenue                     806.9          747.7        2,406.3        2,160.8
Net investment income                       88.5           90.9          269.9          278.3
Net realized capital losses               (213.7 )         (3.6 )       (245.4 )        (33.2 )
  Total revenue                          7,132.5        6,280.4       21,424.0       18,322.6
Health care costs (2)                    5,216.6        4,323.1       15,456.1       12,814.1
Operating expenses:
 Selling expenses                          259.0          243.1          789.6          722.6
 General and administrative
expenses (3)                             1,041.1          937.1        3,124.0        2,693.4
Total operating expenses                 1,300.1        1,180.2        3,913.6        3,416.0
Amortization of other acquired
intangible assets                           23.7           24.2           75.3           64.4
  Total benefits and expenses            6,540.4        5,527.5       19,445.0       16,294.5
Income before income taxes                 592.1          752.9        1,979.0        2,028.1
Income taxes                               211.0          266.6          703.0          718.3
Net income                            $    381.1     $    486.3     $  1,276.0     $  1,309.8

(1) Commercial includes all medical, dental and other Insured products except Medicare and Medicaid.
(2) The percentage of health care costs related to capitated arrangements with primary care physicians (a fee arrangement where we pay providers a monthly fixed fee for each member, regardless of the medical services provided to the member) was 5.2% and 5.0% for the three and nine months ended September 30, 2008, respectively, compared to 5.6% for both of the corresponding periods in 2007.
(3) Includes salaries and related benefit expenses of $613.4 million and $1.8 billion for the three and nine months ended September 30, 2008, respectively, and $550.3 million and $1.6 billion, respectively, for the corresponding periods in 2007.

The table presented below reconciles operating earnings to net income reported in accordance with GAAP for the three and nine months ended September 30, 2008 and 2007:

                                Three Months Ended           Nine Months Ended
                                   September 30,               September 30,
(Millions)                          2008         2007          2008          2007
Net income                    $    381.1      $ 486.3     $ 1,276.0     $ 1,309.8
Net realized capital losses        138.9          2.3         159.5          21.5
Operating earnings            $    520.0      $ 488.6     $ 1,435.5     $ 1,331.3

Operating earnings for the three and nine months ended September 30, 2008 when compared to the corresponding periods in 2007 reflect growth in premiums, fees and other revenue and solid underwriting results as well as continued operating expense efficiencies (operating expenses divided by total revenue). The growth in premiums and fees and other revenue resulted from increases in membership levels from current and new customers (refer to Membership on page 27) as well as premium rate increases for renewing membership.

We calculate our medical benefit ratio ("MBR") by dividing health care costs by premiums. For the three and nine months ended September 30, 2008 and 2007, our MBRs were as follows:

               Three Months Ended          Nine Months Ended
                  September 30,              September 30,
                  2008          2007          2008         2007
Commercial        80.3 %        78.6 %        80.2 %       79.5 %
Medicare          83.0 %        84.4 %        85.3 %       86.9 %
Medicaid          81.1 %        85.5 %        87.7 %       87.4 %
Total             80.9 %        79.4 %        81.4 %       80.5 %

Refer to our discussion of Commercial, Medicare and Medicaid results that follows for an explanation of the changes in our MBR.

Our Commercial products continued to grow in 2008 Commercial premiums increased approximately $366 million and $1.1 billion for the three and nine months ended September 30, 2008, respectively, compared to the corresponding periods in 2007. This increase reflects premium rate increases on renewing business and an increase in membership levels.

Our Commercial MBR was 80.3% and 80.2% for the three and nine months ended September 30, 2008, respectively, and 78.6% and 79.5%, respectively, for the corresponding periods in 2007. For the three months ended September 30, 2008, we had approximately $56 million of unfavorable development of prior period health care cost estimates. This development was driven by unusually high paid claims activity in the third quarter primarily related to second quarter 2008 dates of service. We had no significant development of prior period health care cost estimates for the nine months ended September 30, 2008 or the three or nine months ended September 30, 2007. Taking this development into account, the Commercial MBR for the three months ended September 30, 2008 was slightly higher than the corresponding period in 2007, reflecting a percentage increase in our per member health care costs that slightly outpaced the percentage increase in per member premiums. The increase in per member health care costs was driven primarily by increases in costs related to physician services, emergency room and ancillary services as well as moderate increases in hospital inpatient and outpatient costs. Refer to Critical Accounting Estimates - Health Care Costs Payable in our 2007 Annual Report for a discussion of Health Care Costs Payable.

Medicare results for 2008 reflect growth from 2007 Medicare premiums increased approximately $575 million and $1.7 billion for the three and nine months ended September 30, 2008, respectively, compared to the corresponding periods in 2007. This increase primarily reflects growth in our group private-fee-for-service Medicare ("PFFS") plans, including the conversion of a large customer's membership from a Commercial ASC plan to a Medicare Insured plan, and increases in premiums from our Medicare products as a result of higher membership levels, rate increases from CMS and premium rate increases.

The Medicare MBRs for the three and nine months ended September 30, 2008 were 83.0% and 85.3%, respectively, compared to 84.4% and 86.9%, respectively, for the corresponding periods in 2007. For the three months ended September 30, 2008 and 2007, we had approximately $26 million and $24 million, respectively, of favorable development of prior period health care cost estimates, primarily related to claims incurred in the six months ended June 30, 2008 and 2007, respectively. We had no significant development of prior period health care cost estimates for the nine months ended September 30, 2008 or 2007. The decrease in the Medicare MBRs for the three and nine months ended September 30, 2008 reflects a percentage increase in our per member premiums that outpaced the percentage increase in per member health care costs.

Medicaid results for 2008 reflect growth from the Schaller Anderson, Incorporated ("Schaller Anderson") acquisition.
Medicaid premiums increased approximately $65 million and $316 million for the three and nine months ended September 30, 2008, respectively, compared to the corresponding periods in 2007. This increase primarily reflects an increase in premiums as a result of our acquisition of Schaller Anderson in July 2007. The Medicaid MBRs were 81.1% and 87.7% for the three and nine months ended September 30, 2008, respectively, compared to 85.5% and 87.4%, respectively, for the corresponding periods in 2007. For the three months ended September 30, 2008, we had approximately $7 million of favorable development of prior period health care cost estimates primarily related to a large Insured contract. We had no significant development of Medicaid prior period health care cost estimates for the three months ended September 30, 2007 or the nine months ended September 30, 2008 or 2007.

Other Sources of Revenue
Fees and other revenue increased approximately $59 million and $246 million for the three and nine months ended September 30, 2008, respectively, compared to the corresponding periods in 2007, reflecting revenue from our acquisitions of Schaller Anderson and Goodhealth Worldwide (Bermuda) Limited ("Goodhealth"), as well as growth in ASC membership.

Net realized capital losses for the three and nine months ended September 30, 2008 were due primarily to other-than-temporary impairments of debt securities (refer to Investments - Capital Gains and Losses on page 33 for additional information). Net realized capital losses for the three months ended September 30, 2008 were also due to net losses on the sale of debt securities. Net realized capital losses for the three and nine months ended September 30, 2007 were due primarily to other-than-temporary impairments of debt securities partially offset by net gains on the sale of debt securities.

Membership
Health Care's membership at September 30, 2008 and 2007 was as follows:

                                      2008                                          2007
(Thousands)             Insured          ASC        Total             Insured          ASC           Total
Medical:
 Commercial (1)           5,525       10,931       16,456               5,313       10,321          15,634
 Medicare                   365            -          365                 191           15 (2)         206
 Medicaid (1)               180          667          847                 164          609             773
Total Medical
Membership                6,070       11,598       17,668               5,668       10,945          16,613

Consumer-Directed
Health Plans (3)                                    1,412                                              980

Dental:
 Commercial (1)           4,995        7,543       12,538               4,996        7,270          12,266
 Medicare and
Medicaid (1)                226          402          628                 188          392             580
 Network Access (4)           -          951          951                   -          838             838
Total Dental
Membership                5,221        8,896       14,117               5,184        8,500          13,684

Pharmacy:
 Commercial (1)                                     9,809                                            9,549
 Medicare PDP
(stand-alone)                                         372                                              309
 Medicare Advantage
PDP                                                   193                                              150
 Medicaid (1)                                          23                                               21
 Total Pharmacy
Benefit Management
Services                                           10,397                                           10,029
 Mail Order (5)                                       657                                              640
Total Pharmacy
Membership                                         11,054                                           10,669

(1) Approximately 26,000 State Children's Health Insurance Program ("SCHIP") medical members and 21,000 of both SCHIP pharmacy and dental members at September 30, 2007 were reclassified from Commercial to Medicaid. Additionally, dental membership at September 30, 2007 was revised to include Schaller Anderson (Medicaid) membership to conform with the 2008 presentation.
(2) Represents members who participated in a CMS pilot program under which we provided disease and care management services to selected Medicare fee-for-service beneficiaries in exchange for a fee. This program terminated in September 2008.
(3) Represents members in consumer-directed health plans also included in Commercial medical membership above.
(4) Represents members in products that allow these members access to our dental provider network for a nominal fee.
(5) Represents members who purchased medications through our mail order pharmacy operations during the third quarter of 2008 and 2007, respectively, and are included in pharmacy membership above.

Total medical, dental and pharmacy membership at September 30, 2008 increased compared to September 30, 2007. The increase in medical membership was primarily due to growth in our Commercial and Medicare products. Growth in Commercial membership was driven by membership growth within existing plan sponsors and new customers, net of lapses. Growth in Medicare membership was primarily due to growth in our group PFFS plans, including the conversion of a large customer from a Commercial ASC plan to a Medicare Insured plan.

Total dental membership increased in 2008 primarily due to membership growth from both new and current customers.

Pharmacy membership increased in 2008 primarily due to growth in our pharmacy benefit management services and mail order operations. Our pharmacy benefit management services growth was due in part to an increase in Commercial pharmacy membership as well as Medicare Part D prescription drug program membership. Commercial pharmacy membership increased reflecting strong cross selling success. Mail order operations reflected an increase in member utilization during this time period.

GROUP INSURANCE

Group Insurance primarily includes group life insurance products offered on an Insured basis, including basic group term life, group universal life, supplemental or voluntary programs and accidental death and dismemberment coverage. Group Insurance also includes (i) group disability products offered to employers on both an Insured and an ASC basis, which consist primarily of short-term and long-term disability insurance (and products which combine both),
(ii) absence management services offered to employers, which include short-term and long-term disability administration and leave management and (iii) long-term care products that were offered primarily on an Insured basis, which provide benefits covering the cost of care in private home settings, adult day care, assisted living or nursing facilities. We no longer solicit or accept new long-term care customers, and we are working with our customers on an orderly transition of this product to other carriers.

Operating Summary for the Three and Nine Months Ended September 30, 2008 and 2007:

                                          Three Months Ended             Nine Months Ended
                                            September 30,                  September 30,
(Millions)                                   2008           2007           2008           2007
Premiums:
 Life                                 $     267.4     $    299.2     $    796.6     $    901.0
 Disability                                 135.3          122.3          399.8          359.0
 Long-term care                              21.5           21.6           65.5           70.0
Total premiums                              424.2          443.1        1,261.9        1,330.0
Fees and other revenue                       24.3           25.6           73.4           75.6
Net investment income                        62.7           68.4          192.2          228.7
Net realized capital losses                (117.6 )        (10.9 )       (155.2 )        (31.5 )
  Total revenue                             393.6          526.2        1,372.3        1,602.8
Current and future benefits                 355.3          396.7        1,087.2        1,220.3
Operating expenses:
 Selling expenses                            23.2           24.0           72.0           71.1
 General and administrative
expenses (1)                                 65.6           63.3          195.0          191.8
 Allowance on reinsurance
recoverable                                  42.2              -           42.2              -
Total operating expenses                    131.0           87.3          309.2          262.9
Amortization of other acquired
intangible assets                             1.7            1.7            5.2            5.1
  Total benefits and expenses               488.0          485.7        1,401.6        1,488.3
(Loss) income before income taxes           (94.4 )         40.5          (29.3 )        114.5
Income taxes                                (37.7 )          9.4          (22.4 )         26.5
Net (loss) income                     $     (56.7 )   $     31.1     $     (6.9 )   $     88.0

(1) Includes salaries and related benefit expenses of $43.9 million and $128.3 million for the three and nine months ended September 30, 2008, respectively, and $46.2 million and $112.2 million, respectively, for the corresponding periods in 2007.

The table presented below reconciles operating earnings to net income reported in accordance with GAAP for the three and nine months ended September 30, 2008 and 2007:

                                             Three Months Ended          Nine Months Ended
                                                September 30,              September 30,
(Millions, after tax)                            2008         2007           2008        2007
Net (loss) income                          $    (56.7 )     $ 31.1     $     (6.9 )   $  88.0
Net realized capital losses                      76.5          7.1          100.9        20.5
Allowance on reinsurance recoverable (1)         27.4            -           27.4           -
Operating earnings                         $     47.2       $ 38.2     $    121.4     $ 108.5

(1) As a result of the liquidation proceedings of Lehman Re Ltd. ("Lehman Re"), a subsidiary of Lehman Brothers Holdings Inc., we recorded an allowance against our reinsurance recoverable from Lehman Re of $27.4 million ($42.2 million pretax) in the three and nine months ended September 30, 2008. This reinsurance is on a closed block of paid-up group whole life insurance . . .