OVERVIEW

We are one of the nation's leading diversified health care benefits companies, serving approximately 36.3 million people with information and resources to help them make better informed decisions about their health care. 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, 2009 and December 31, 2008 and results of operations for the three and nine months ended September 30, 2009 and 2008. 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 in this Quarterly Report on Form 10-Q as well as the MD&A contained in our 2008 Annual Report on Form 10-K (the "2008 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, 2009 and 2008:

                             Three Months Ended        Nine Months Ended
                               September 30,             September 30,
(Millions)                       2009        2008         2009         2008
Revenue:
 Health Care               $  8,048.6   $ 7,132.5   $ 23,984.9   $ 21,424.0
 Group Insurance                541.1       393.6      1,617.5      1,372.3
 Large Case Pensions            132.7        98.5        405.5        395.1
Total revenue                 8,722.4     7,624.6     26,007.9     23,191.4
Net income                      326.2       277.3      1,110.6      1,189.4
Operating earnings: (1)
 Health Care                    345.7       496.8      1,151.1      1,366.3
 Group Insurance                 33.3        46.4        117.9        119.1
 Large Case Pensions              6.7         8.8         23.6         26.8

(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 27 for a discussion of non-GAAP measures. Refer to pages 28, 32 and 33 for a reconciliation of operating earnings to net income for Health Care, Group Insurance and Large Case Pensions, respectively.

The operating earnings of our business segments for the three and nine months ended September 30, 2009 were lower than the corresponding periods in 2008, primarily due to lower Commercial underwriting margins in our Health Care segment. During the three and nine months ended September 30, 2009, our Commercial health care products experienced increased per member per month health care costs that outpaced the increase in per member premiums, which resulted in a higher Commercial medical benefit ratio and a lower Commercial underwriting margin in 2009.

Additionally, operating earnings reflect higher health care revenue for the three and nine months ended September 30, 2009 compared with the corresponding periods in 2008, driven by growth in membership and premium rate increases for renewing membership in 2009. We experienced membership growth in both our administrative services contract ("ASC") (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) and Insured (where we assume all or a majority of the risk for medical and dental care costs) products. At September 30, 2009, we served approximately ­­­19.0 million medical members (consisting of approximately 34% Insured members and 66% ASC members), 14.2 million dental members and 11.2 million pharmacy members.

We continued to generate strong cash flows from operations in 2009, generating $2.0 billion of cash flows from operations in our Health Care and Group Insurance businesses during the nine months ended September 30, 2009. These cash flows funded ordinary course operating activities and our share repurchase programs. During the nine months ended September 30, 2009, we repurchased approximately 25 million shares of our common stock at a cost of approximately $662 million.

TRICARE Managed Care Support Contract
In July 2009, we were awarded the TRICARE managed care support contract for the North Region by the U.S. Department of Defense. Under this administrative services contract, which commences in 2010, we expect to support health care delivery to approximately 2.8 million eligible beneficiaries who are active duty service members, retirees and family members based in the 21 states of TRICARE's North Region. The contract consists of five one-year option periods. The contract award is subject to a pending appeal by the incumbent, and a decision on the appeal is expected in early November, 2009. We cannot predict the outcome of the appeal.

Pending Acquisition
On July 31, 2009, we announced an agreement to acquire Horizon Behavioral Services, LLC, a leading provider of employee assistance programs, for approximately $70 million, which we expect to finance with available resources. We expect to close this transaction after satisfaction of customary closing conditions, including receipt of regulatory approvals.

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 the accounting guidance for segment reporting and is consistent with our segment disclosure included in Note 14 of Condensed Notes to Consolidated Financial Statements on page 22. 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 Corporate Financing segment is not a business segment. It is added to our business segments to reconcile to our consolidated results. The Corporate Financing segment includes interest expense on our outstanding debt and, beginning in 2009, the financing components of our pension plan and OPEB plan expense (the service cost components of this expense are allocated to our business segments). Prior periods have been reclassified to reflect this change.

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 in this MD&A, 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.

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.

                                             Three Months Ended            Nine Months Ended
                                                September 30,                September 30,
(Millions)                                      2009          2008           2009           2008
Premiums:
 Commerical                                $ 5,415.5     $ 5,086.6     $ 16,107.5     $ 14,924.4
 Medicare                                    1,434.2       1,209.9        4,313.2        3,631.7
 Medicaid                                      243.1         154.3          694.8          437.1
Total premiums                               7,092.8       6,450.8       21,115.5       18,993.2
Fees and other revenue                         847.6         806.9        2,571.8        2,406.3
Net investment income                           97.4          88.5          290.7          269.9
Net realized capital gains (losses)             10.8        (213.7 )          6.9         (245.4 )
  Total revenue                              8,048.6       7,132.5       23,984.9       21,424.0
Health care costs                            6,069.6       5,216.6       17,976.2       15,456.1
Operating expenses:
 Selling expenses                              289.7         259.0          869.1          789.6
 General and administrative expenses         1,132.0       1,076.9        3,261.4        3,230.8
Total operating expenses                     1,421.7       1,335.9        4,130.5        4,020.4
Amortization of other acquired
intangible assets                               22.2          23.7           67.8           75.3
  Total benefits and expenses                7,513.5       6,576.2       22,174.5       19,551.8
Income before income taxes                     535.1         556.3        1,810.4        1,872.2
Income taxes                                   178.6         198.4          627.5          665.4
Net income                                 $   356.5     $   357.9     $  1,182.9     $  1,206.8

The table presented below reconciles net income to operating earnings reported in accordance with GAAP for the three and nine months ended September 30, 2009 and 2008:

                                            Three Months Ended         Nine Months Ended
                                               September 30,             September 30,
(Millions)                                      2009         2008        2009          2008
Net income                                $    356.5      $ 357.9   $ 1,182.9     $ 1,206.8
Litigation-related insurance proceeds (1)          -            -       (24.9 )           -
Net realized capital (gains) losses            (10.8 )      138.9        (6.9 )       159.5
Operating earnings                        $    345.7      $ 496.8   $ 1,151.1     $ 1,366.3

(1) Following a Pennsylvania Supreme Court ruling in June 2009, we received $24.9 million ($38.2 million pretax) from one of our liability insurers related to certain litigation we settled in 2003. We believe these litigation-related insurance proceeds neither relate to the ordinary course of our business nor reflect our underlying business performance, and therefore, we have excluded them from operating earnings in the nine months ended September 30, 2009. We are continuing to litigate similar claims against certain of our other liability insurers.

Operating earnings for the three and nine months ended September 30, 2009, when compared to the corresponding periods in 2008, reflect a significantly lower underwriting margin, particularly for Commercial products (refer to discussion of Commercial results on page 29) partially offset by growth in premiums and fees and other revenue, higher net investment income and continued operating expense efficiencies (total operating expenses divided by total revenue). The growth in premiums and fees and other revenue resulted from increases in membership levels 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, 2009 and 2008, our MBRs by product were as follows:

             Three Months Ended          Nine Months Ended
                September 30,              September 30,
               2009           2008        2009          2008
Commercial     85.6 %         80.3 %      84.4 %        80.2 %
Medicare       85.4 %         83.0 %      87.2 %        85.3 %
Medicaid       86.6 %         81.1 %      89.8 %        87.7 %
Total          85.6 %         80.9 %      85.1 %        81.4 %

For the three months ended September 30, 2009, we had approximately $30 million of favorable development of prior-period health care cost estimates. This development was not significant for our Commercial, Medicare, or Medicaid products when analyzed separately.

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

The operating results of our Commercial products reflect significantly lower underwriting margins in the three and nine months ended September 30, 2009. Commercial premiums increased approximately $329 million and $1.2 billion for the three and nine months ended September 30, 2009, respectively, when compared to the corresponding periods in 2008. This increase primarily reflects premium rate increases on renewing business and higher membership levels.

Our Commercial MBR was 85.6% and 84.4% for the three and nine months ended September 30, 2009, respectively, and 80.3% and 80.2%, respectively, for the corresponding periods in 2008. The Commercial MBRs for the three and nine months ended September 30, 2009 were substantially higher than the corresponding periods in 2008, reflecting a percentage increase in our per member health care costs that outpaced the percentage increase in per member premiums. The increase in per member health care costs was driven primarily by continued higher claim intensity, higher costs from the H1N1 influenza and higher costs from higher participation rates in health care continuation coverage afforded to individuals under the Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA") (refer to our discussion of our Regulatory Environment beginning on page 39).

For the three months ended September 30, 2008, we had approximately $56 million of unfavorable development of prior period Commercial 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 Commercial health care cost estimates for the three months ended September 30, 2009. Refer to Critical Accounting Estimates - Health Care Costs Payable in our 2008 Annual Report for a discussion of Health Care Costs Payable.

Medicare results for the three and nine months ended September 30, 2009 reflect growth from the corresponding periods in 2008.
Medicare premiums increased approximately $224 million and $682 million for the three and nine months ended September 30, 2009, compared to the corresponding periods in 2008. This increase primarily reflects growth in our group private-fee-for-service ("PFFS") Medicare Advantage plans, increases in supplemental premiums across all our Medicare Advantage products, rate increases from the Centers for Medicare & Medicaid Services ("CMS") and true-ups of premium estimates for specified risk adjustments from CMS.

Our Medicare MBRs for the three and nine months ended September 30, 2009 were 85.4% and 87.2%, respectively, compared to 83.0% and 85.3% for the corresponding periods in 2008. The Medicare MBRs for the three and nine months ended September 30, 2009 were higher than the corresponding period in 2008. For the three months ended September 30, 2008, we had approximately $26 million of favorable development of prior period Medicare health care cost estimates. Excluding this development, our Medicare MBR was consistent in the three months ended September 30, 2009 and 2008. We had no significant development of prior period Medicare health care cost estimates for the three months ended September 30, 2009.

Health Care Costs Payable
We consider the estimate of our health care costs payable to be a critical accounting estimate. Our 2008 Annual Report contains detailed information about this accounting estimate (refer to Critical Accounting Estimates in our 2008 Annual Report for additional information). During the three and nine months ended September 30, 2009, we experienced increased health care costs, primarily in our Commercial products, as described on page 29 and have factored this experience into our current estimates of health care costs payable. We believe our estimate of health care costs payable is reasonable and adequate to cover our obligations as of September 30, 2009; however, our actual health care costs may differ from our estimates.

Other Sources of Revenue
Fees and other revenue increased approximately $41 million and $166 million for the three and nine months ended September 30, 2009, respectively, compared to the corresponding periods in 2008, reflecting growth in ASC membership as described in the Membership table below.

Net realized capital gains were not significant for the three and nine months ended September 30, 2009. 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 - Net Realized Capital Gains and Losses on page 11 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.

Membership
Health Care's membership at September 30, 2009 and 2008 was as follows:

                                         2009                             2008
(Thousands)                  Insured        ASC     Total      Insured       ASC     Total
Medical:
 Commercial                    5,676     11,906    17,582        5,525    10,931    16,456
 Medicare                        428          -       428          365         -       365
 Medicaid                        300        717     1,017          180       667       847
Total Medical Membership       6,404     12,623    19,027        6,070    11,598    17,668

Consumer-Directed Health
Plans (1)                                           1,862                            1,412

Dental:
 Commercial                    5,032      7,436    12,468        4,995     7,543    12,538
 Medicare and Medicaid           254        422       676          226       402       628
 Network Access (2)                -      1,039     1,039            -       951       951
Total Dental Membership        5,286      8,897    14,183        5,221     8,896    14,117

Pharmacy:
 Commercial                                         9,882                            9,809
 Medicare PDP (stand-alone)                           338                              372
 Medicare Advantage PDP                               233                              193
 Medicaid                                              29                               23
 Total Pharmacy Benefit
Management Services                                10,482                           10,397
 Mail Order (3)                                       673                              657
Total Pharmacy Membership                          11,155                           11,054

(1) Represents members in consumer-directed health plans who also are included in Commercial medical membership above.
(2) Represents members in products that allow these members access to our dental provider network for a nominal fee.
(3) Represents members who purchased medications through our mail order pharmacy operations during the third quarter of 2009 and 2008, respectively, and are included in pharmacy membership above.

Total medical, dental and pharmacy membership at September 30, 2009 increased compared to September 30, 2008. The increase in medical membership was primarily due to growth in Commercial membership, driven by growth within existing plan sponsors and new customers, net of lapses, and Medicaid membership attributable to a new Insured contract.

Total dental membership increased in 2009 primarily due to membership growth from both new and current customers.

Pharmacy membership increased in 2009 primarily due to growth in our pharmacy benefit management services and mail order operations. Our pharmacy benefit management services growth was due primarily to an increase in Commercial pharmacy membership. Commercial pharmacy membership increased reflecting strong cross-selling success. Mail order operations reflected an increase in member utilization during this time period.

Sequentially, medical, dental and pharmacy membership at September 30, 2009 decreased compared to June 30, 2009. We project that medical membership will continue to decline sequentially through the first quarter of 2010.

GROUP INSURANCE

Group Insurance primarily includes group life insurance products offered on an Insured basis, including basic and supplemental 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, (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, 2009 and 2008:

                                                   Three Months Ended             Nine Months Ended
                                                      September 30,                 September 30,
(Millions)                                            2009          2008            2009          2008
Premiums:
 Life                                            $   270.0      $  267.4       $   826.6     $   796.6
 Disability                                          144.2         135.3           425.0         399.8
 Long-term care                                       16.5          21.5            53.0          65.5
Total premiums                                       430.7         424.2         1,304.6       1,261.9
Fees and other revenue                                26.4          24.3            81.9          73.4
Net investment income                                 71.1          62.7           204.6         192.2
Net realized capital gains (losses)                   12.9        (117.6 )          26.4        (155.2 )
  Total revenue                                      541.1         393.6         1,617.5       1,372.3
Current and future benefits                          388.3         355.3         1,145.5       1,087.2
Operating expenses:
 Selling expenses                                     22.5          23.2            69.4          72.0
 General and administrative expenses                  69.1          66.7           209.0         198.1
 Allowance on reinsurance recoverable                    -          42.2               -          42.2
Total operating expenses                              91.6         132.1           278.4         312.3
Amortization of other acquired intangible assets       1.7           1.7             5.1           5.2
  Total benefits and expenses                        481.6         489.1         1,429.0       1,404.7
Income (loss) before income taxes                     59.5         (95.5 )         188.5         (32.4 )
Income taxes                                          13.3         (38.0 )          44.2         (23.2 )
Net income (loss)                                $    46.2      $  (57.5 )     $   144.3     $    (9.2 )

                                           Three Months Ended          Nine Months Ended
                                              September 30,              September 30,
(Millions)                                     2009         2008           2009        2008
Net income (loss)                        $     46.2      $ (57.5 )   $    144.3     $  (9.2 )
Net realized capital (gains) losses           (12.9 )       76.5          (26.4 )     100.9
Allowance on reinsurance recoverable (1)          -         27.4              -        27.4
Operating earnings                       $     33.3      $  46.4     $    117.9     $ 119.1

(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 business. We believe this charge neither relates to the ordinary course of our business nor reflects our underlying business performance, and therefore, we have excluded it from operating earnings for the three and nine months ended September 30, 2008.

Operating earnings decreased in the three months ended September 30, 2009 compared to the corresponding period in 2008 primarily reflecting a lower . . .