UNITED STATES

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2006

or

� TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to_________ Commission file number: 1-16095

Aetna Inc. (Exact name of registrant as specified in its charter)

Pennsylvania 23-2229683 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

151 Farmington Avenue, Hartford, CT 06156 (Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (860) 273-0123 Former name, former address and former fiscal year, if changed since last report: N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes � No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer � Non-accelerated filer � Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). � Yes No There were 522.0 million shares of voting common stock with a par value of $.01 outstanding at September 30, 2006.

Table of Contents Page

Part I Financial Information Item 1. Financial Statements 1 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Item 3. Quantitative and Qualitative Disclosures About Market Risk 45 Item 4. Controls and Procedures 45 Part II Other Information Item 1. Legal Proceedings 45 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46 Item 6. Exhibits 47 Signatures 48 Index to Exhibits 49

Part I Financial Information Item 1. Financial Statements Consolidated Statements of Income (Unaudited)

(Millions, except per common share data) 2006 2005 2006 2005 Revenue: Health care premiums 4,820.3$ 4,291.3$ 14,308.3$ 12,490.5$ Other premiums 472.5 494.2 1,482.5 1,494.4 Fees and other revenue * 712.9 626.8 2,121.4 1,793.3 Net investment income 278.3 279.9 852.1 827.7 Net realized capital gains 15.5 8.5 21.9 18.6 Total revenue 6,299.5 5,700.7 18,786.2 16,624.5 Benefits and expenses: Health care costs ** 3,797.4 3,390.4 11,481.9 9,683.6 Current and future benefits 554.1 581.8 1,733.6 1,778.4 Operating expenses: Selling expense 231.7 214.1 715.3 623.0 General and administrative expenses 925.6 885.1 2,876.3 2,673.5 Total operating expenses 1,157.3 1,099.2 3,591.6 3,296.5 Interest expense 39.9 32.5 107.2 90.2 Amortization of other acquired intangible assets 22.0 15.9 63.7 38.1 Reduction of reserve for anticipated future losses on discontinued products - - (115.4) (66.7) Total benefits and expenses 5,570.7 5,119.8 16,862.6 14,820.1 Income from continuing operations before income taxes 728.8 580.9 1,923.6 1,804.4 Income taxes: Current 213.0 183.1 611.3 515.2 Deferred 39.4 25.0 60.8 132.2 Total income taxes 252.4 208.1 672.1 647.4 Income from continuing operations 476.4 372.8 1,251.5 1,157.0 Discontinued operations, net of tax (Note 16) - - 16.1 - Net income 476.4$ 372.8$ 1,267.6$ 1,157.0$

Earnings per common share:Basic: Income from continuing operations .89$ .65$ 2.26$ 1.99$ Discontinued operations, net of tax - - .02 - Net income .89$ .65$ 2.28$ 1.99$

Diluted: Income from continuing operations .85$ .62$ 2.16$ 1.91$ Discontinued operations, net of tax - - .03 - Net income .85$ .62$ 2.19$ 1.91$

For the Three MonthsEnded September 30,

For the Nine MonthsEnded September 30,

* Fees and other revenue include administrative services contract member co-payment revenue and plan sponsor reimbursements related to our mail order and specialty pharmacy operations of $10.3 million and $26.4 million (net of pharmaceutical and processing costs of $342.2 million and $1.0 billion) for the three and nine months ended September 30, 2006, respectively, and $7.4 million and $15.5 million (net of pharmaceutical and processing costs of $226.2 million and $644.9 million) for the three and nine months ended September 30, 2005, respectively. ** Health care costs have been reduced by fully insured member co-payment revenue related to our mail order and specialty pharmacy operations of $24.4 million and $70.2 million for the three and nine months ended September 30, 2006, respectively, and $20.5 million and $57.3 million for the three and nine months ended September 30, 2005, respectively. Refer to accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

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Consolidated Balance Sheets (Unaudited)

At September 30, At December 31, (Millions) 2006 2005 AssetsCurrent assets: Cash and cash equivalents 1,214.3$ 1,192.6$ Investment securities 13,263.3 13,366.2 Other investments 234.1 96.8 Premiums receivable, net 429.0 349.2 Other receivables, net 533.3 366.7 Accrued investment income 186.2 184.9 Collateral received under securities loan agreements 924.4 1,138.8 Loaned securities 895.8 1,115.7 Deferred income taxes 35.8 - Other current assets 492.2 423.8 Total current assets 18,208.4 18,234.7 Long-term investments 1,681.6 1,662.1 Mortgage loans 1,381.2 1,460.8 Investment real estate 188.1 207.2 Reinsurance recoverables 1,115.7 1,143.7 Goodwill 4,622.7 4,523.2 Other acquired intangible assets, net 713.5 724.9 Property and equipment, net 276.3 272.8 Deferred income taxes 40.1 68.7 Other long-term assets 1,800.1 1,602.8 Separate Accounts assets 16,914.6 14,532.4 Total assets 46,942.3$ 44,433.3$

Liabilities and shareholders' equityCurrent liabilities: Health care costs payable 1,954.5$ 1,817.0$ Future policy benefits 793.2 806.1 Unpaid claims 778.7 752.1 Unearned premiums 187.7 156.9 Policyholders' funds 595.7 757.7 Collateral payable under securities loan agreements 924.4 1,138.8 Short-term debt 1.5 - Current portion of long-term debt - 450.0 Income taxes payable 72.5 36.7 Deferred income taxes - 10.4 Accrued expenses and other current liabilities 1,891.0 1,691.1 Total current liabilities 7,199.2 7,616.8 Future policy benefits 7,469.2 7,642.1 Unpaid claims 1,165.5 1,144.9 Policyholders' funds 1,291.0 1,304.2 Long-term debt, less current portion 2,442.0 1,155.7 Other long-term liabilities 810.7 848.5 Separate Accounts liabilities 16,914.6 14,532.4 Total liabilities 37,292.2 34,244.6 Commitments and contingencies (Note 13)Shareholders' equity: Common stock and additional paid-in capital ($.01 par value, 2.8 billion shares authorized, 522.0 million shares issued and outstanding in 2006 and 1.4 billion shares authorized, 566.5 million shares issued and outstanding in 2005) 660.4 2,414.7 Retained earnings 8,970.4 7,723.7 Accumulated other comprehensive income 19.3 50.3 Total shareholders' equity 9,650.1 10,188.7 Total liabilities and shareholders' equity 46,942.3$ 44,433.3$

Refer to accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

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Consolidated Statements of Shareholders’ Equity (Unaudited)

Number ofCommon

Shares Retained(Millions) Outstanding EarningsNine Months Ended September 30, 2006Balance at December 31, 2005 566.5 2,414.7$ 7,723.7$ 50.3$ 10,188.7$ Comprehensive income: Net income - - 1,267.6 - 1,267.6 1,267.6$ Other comprehensive income: Net unrealized losses on securities (1) - - - (41.0) (41.0) Net foreign currency gains - - - .9 .9 Net derivative gains (1) - - - 9.1 9.1 Other comprehensive income - - - (31.0) (31.0) (31.0) Total comprehensive income 1,236.6$ Common shares issued for benefit plans, including tax benefit 7.1 209.4 - - 209.4 Repurchases of common shares (51.6) (1,963.7) - - (1,963.7) Dividends declared - - (20.9) - (20.9) Balance at September 30, 2006 522.0 660.4$ 8,970.4$ 19.3$ 9,650.1$

Nine Months Ended September 30, 2005Balance at December 31, 2004 586.0 3,541.5$ 6,161.8$ (541.5)$ 9,161.8$ Comprehensive income: Net income - - 1,157.0 - 1,157.0 1,157.0$ Other comprehensive loss: Net unrealized losses on securities (1) - - - (104.8) (104.8) Net foreign currency gains - - - .8 .8 Net derivative losses (1) - - - (3.0) (3.0) Other comprehensive loss - - - (107.0) (107.0) (107.0) Total comprehensive income 1,050.0$ Common shares issued for benefit plans, including tax benefits 18.6 442.9 - - 442.9 Repurchases of common shares (32.6) (1,238.4) - - (1,238.4) Dividends declared - - (11.4) - (11.4) Balance at September 30, 2005 572.0 2,746.0$ 7,307.4$ (648.5)$ 9,404.9$

Common AccumulatedStock and Other Total

Additional Comprehensive Shareholders' ComprehensivePaid-in Capital (Loss) Income Equity Income

(1) Net of reclassification adjustments (refer to Note 8). Refer to accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

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Consolidated Statements of Cash Flows (Unaudited)

(Millions) 2006 2005 Cash flows from operating activities:Net income 1,267.6$ 1,157.0$ Adjustments to reconcile net income to net cash provided by operating activities: Discontinued operations (16.1) - Physicians class action settlement insurance-related charge 72.4 - Depreciation and amortization 197.9 147.5 Amortization of net investment premium 13.3 19.5 Stock-based compensation expense 61.9 83.8 Net realized capital gains (21.9) (18.6) Changes in assets and liabilities: (Increase) decrease in accrued investment income (1.3) 12.0 Increase in premiums due and other receivables (122.6) (106.7) Net change in income taxes 68.5 290.6 Net change in other assets and other liabilities (270.7) (383.1) Net decrease in health care and insurance liabilities (36.4) (60.4) Other, net (69.3) (32.4) Net cash provided by operating activities of continuing operations 1,143.3 1,109.2 Discontinued operations, net (Note 16) 49.7 - Net cash provided by operating activities 1,193.0 1,109.2

Cash flows from investing activities: Proceeds from sales and investment maturities of: Debt securities available for sale 7,900.9 8,002.9 Other investments 1,160.1 874.1 Cost of investments in: Debt securities available for sale (7,693.6) (7,497.2) Other investments (1,057.3) (798.4) Increase in property, equipment and software (203.8) (183.1) Cash used for acquisitions, net of cash acquired (159.9) (1,021.5) Net cash used for investing activities (53.6) (623.2)

Cash flows from financing activities: Deposits and interest credited for investment contracts 23.4 30.6 Withdrawals of investment contracts (195.0) (30.2) Net issuance of short-term debt 1.5 - Proceeds from issuance of long-term debt, net of issuance costs 1,978.9 - Repayment of long-term debt (1,150.0) - Common shares issued under benefit plans 81.3 223.5 Stock-based compensation tax benefits 66.5 137.5 Common shares repurchased (1,924.3) (1,210.7) Net cash used for financing activities (1,117.7) (849.3)

Net increase (decrease) in cash and cash equivalents 21.7 (363.3) Cash and cash equivalents, beginning of period 1,192.6 1,396.0 Cash and cash equivalents, end of period 1,214.3$ 1,032.7$

Supplemental cash flow information: Interest paid 93.9$ 105.5$ Income taxes paid 487.4 218.5

September 30,Nine Months Ended

Refer to accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

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Condensed Notes to Consolidated Financial Statements (Unaudited) Unless the context otherwise requires, references to the terms “we,” “our” or “us” used throughout these Notes refer to Aetna Inc. (a Pennsylvania corporation) (“Aetna”) and its subsidiaries (collectively, the “Company”). 1. Organization Our operations include three business segments:

• Health Care consists of medical, pharmacy benefits management and dental and vision plans offered on both a Risk basis (where we assume all or a majority of the risk for medical and dental care costs) and an employer-funded basis (where the plan sponsor under an administrative services contract (“ASC”) assumes all or a majority of this risk). Medical plans include point-of-service (“POS”), health maintenance organization (“HMO”), preferred provider organization (“PPO”) and indemnity benefit products. Medical plans also include health savings accounts (“HSAs”) and Aetna HealthFund®, consumer-directed plans that combine traditional POS or PPO and/or dental coverage, subject to a deductible, with an accumulating benefit account (which may be funded by the plan sponsor or member in the case of HSAs). We also offer 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.

• Group Insurance includes primarily group life insurance products offered on a Risk basis, including basic

term group life insurance, group universal life, supplemental or voluntary programs and accidental death and dismemberment coverage. Group Insurance also includes group disability products offered on both a Risk and an ASC basis which consist primarily of short-term and long-term disability insurance (and products which combine both), as well as long-term care products, which provide benefits offered to cover the cost of care in private home settings, adult day care, assisted living or nursing facilities, primarily on a Risk basis. Additionally, as a result of the Broadspire Disability acquisition on March 31, 2006 (refer to Note 3), Group Insurance includes absence management services, including short-term and long-term disability administration and leave management, to employers. In the fourth quarter of 2006, we decided to exit the long-term care insurance market and no longer solicit or accept new long-term care customers. Over the next two to three years, we will work with our customers on an orderly transition of this business to other carriers. This decision will not have a material impact on our financial condition or results of operations.

• Large Case Pensions manages a variety of retirement products (including pension and annuity products)

primarily for tax qualified pension plans. These products provide a variety of funding and benefit payment distribution options and other services. The Large Case Pensions segment includes certain discontinued products (refer to Note 15 for additional information).

On January 27, 2006, our Board of Directors (the “Board”) declared a two-for-one stock split of our common shares (“common stock”) which was effected in the form of a 100% common stock dividend. All shareholders of record at the close of business on February 7, 2006 received one additional share of common stock for each share held on that date distributed in the form of a stock dividend on February 17, 2006. All share and per share amounts in the accompanying unaudited consolidated financial statements and related notes have been adjusted to reflect the stock split for all periods presented. These interim statements necessarily rely heavily on estimates, including assumptions as to annualized tax rates. In the opinion of management, all adjustments necessary for a fair statement of results for the interim periods have been made. All such adjustments are of a normal, recurring nature. The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes presented in Aetna’s 2005 Annual Report on Form 10-K (the “2005 Annual Report”). Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), but that is not required for interim reporting purposes, has been condensed or omitted.

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2. Summary of Significant Accounting Policies Principles of Consolidation These unaudited consolidated financial statements have been prepared in accordance with GAAP and include the accounts of Aetna and the subsidiaries that we control. All significant intercompany balances have been eliminated in consolidation. New Accounting Standard Effective January 1, 2006, we adopted Statement of Financial Accounting Standards (“FAS”) No. 123 Revised, “Share-Based Payment” (“FAS 123R”), which is a revision of FAS 123, “Accounting for Stock-Based Compensation.” FAS 123R also supercedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and amends FAS 95, “Statement of Cash Flows.” Prior to the adoption of FAS 123R, we applied the provisions of FAS 123 to our stock-based compensation arrangements. FAS 123 permitted us to account for our stock-based compensation using the intrinsic value method prescribed by APB 25, accompanied by pro forma disclosures of net income and earnings per share as if we had applied the fair value method to such compensation. FAS 123R requires companies to expense the fair value of all stock-based compensation awards (including stock options, stock appreciation rights, restricted stock units and other stock-based awards) issued to employees and non-employees, eliminating the alternative of measuring such awards using the intrinsic value method. FAS 123R requires the fair value to be calculated using a quoted market price or a valuation model (such as the modified Black-Scholes or binomial-lattice models) if a quoted market price is not available. Consistent with our historical practice of measuring the fair value of stock-based compensation for our pro forma disclosures, we utilize a modified Black-Scholes model to determine the fair value of our stock-based compensation awards. Stock-based compensation expense is measured at the grant date, based on the fair value of the award and is recognized as expense over the requisite service period, which primarily is the vesting period, except for retirement eligible individuals for whom a majority of the expense is recognized in the year of grant. The amendment to FAS 95 requires the benefits of tax deductions in excess of recognized compensation cost to be reported as financing cash inflows rather than as a reduction in income taxes paid, which is included within operating cash flows. We utilized the modified-retrospective approach of adopting FAS 123R. Under this approach, beginning January 1, 2006, all prior period financial information was adjusted to reflect our stock-based compensation activity since 1995. The modified-retrospective application of FAS 123R resulted in a reduction in net income for the three and nine months ended September 30, 2005 of $5 million ($8 million pretax) and $55 million ($84 million pretax), respectively. Basic and diluted net income per common share were each reduced by $.01 per share for the three months ended September 30, 2005 and $.09 per share for the nine months ended September 30, 2005. Additionally, $138 million of cash inflows related to tax deductions in excess of recognized compensation costs have been reclassified from operating cash flows to financing cash flows for the nine months ended September 30, 2005. Prior period shareholders’ equity and deferred taxes have been increased to reflect the results of the modified-retrospective application of FAS 123R. The following table details the impact of FAS 123R on our Consolidated Balance Sheet as of December 31, 2005:

Retrospectively Previously(Millions) Applied ReportedNet deferred income tax asset (liability) 58.3$ (25.5)$ Common stock and additional paid-in capital 2,414.7 1,885.1 Retained earnings 7,723.7 8,169.5

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Additionally, the balances in shareholders’ equity at December 31, 2004 in our Consolidated Statements of Shareholders’ Equity reflect the following changes:

Retrospectively Previously(Millions) Applied ReportedCommon stock and additional paid-in capital 3,541.5$ 3,076.5$ Retained earnings 6,161.8 6,546.4 Refer to Note 9 for additional information on our stock-based compensation plans. Future Application of Accounting Standards Pensions & Other Postretirement Benefits FAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” was issued in September 2006. FAS 158 will require us to recognize the overfunded or underfunded status of our defined benefit pension and other postretirement plans as an asset or a liability, respectively, on the balance sheet and recognize changes in that net funded status in the year in which changes occur through other comprehensive income (a component of our shareholders’ equity). FAS 158 will also require that we measure the plan assets and benefit obligations of these plans as of December 31 of each year (currently, we measure the status of these plans on September 30). In accordance with FAS 158, we will initially recognize the overfunded and underfunded status of our defined benefit pension and other postretirement plans, as applicable, on our consolidated balance sheet and incorporate the required disclosures as of December 31, 2006. Upon adoption of FAS 158 as of December 31, 2006, we will recognize the net underfunded status of our defined benefit pension and other postretirement plans, which will result in an estimated $660 million charge to other comprehensive income. The requirement to measure plan assets and benefit obligations as of December 31 is effective December 31, 2008. We do not expect the adoption of FAS 158 to have a material impact on our results of operations. Certain Financial Instruments In February 2006, the Financial Accounting Standards Board (“FASB”) issued FAS 155, “Accounting for Certain Hybrid Financial Instruments,” which clarifies when certain financial instruments and features of financial instruments must be treated as derivatives and reported on the balance sheet at fair value with changes in fair value reported in net income. We will implement FAS 155 beginning with financial instruments acquired on or after January 1, 2007, which is the effective date of FAS 155. We do not expect the adoption of FAS 155 to have a material impact on our financial position at our date of adoption. However, FAS 155 may affect future income recognition for certain financial instruments that contain certain embedded derivatives as any changes in their fair values will be recognized in net income each period. Uncertain Tax Positions In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by defining criteria that a tax position on an individual matter must meet before that position is recognized in the financial statements. Additionally, FIN 48 provides guidance on measurement, derecognition, classification, interest and penalties, interim period accounting, disclosures and transition. We will adopt FIN 48 beginning January 1, 2007, which is the effective date of FIN 48. We are currently analyzing the impact of adopting FIN 48. Fair Value Measurements In September 2006, the FASB issued FAS 157 “Fair Value Measurements.” FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 does not require new fair value measurements. We will adopt FAS 157 beginning January 1, 2008. We do not expect the adoption of FAS 157 to have a material impact on our financial position or results of operations.

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Use of Estimates Accounting for the Medicare Part D Prescription Drug Program (“PDP”) On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was signed into law. The Act expanded Medicare, primarily by adding a voluntary prescription drug benefit for Medicare eligible individuals beginning in 2006. We were selected by the Centers for Medicare and Medicaid Services (“CMS”) to be a national provider of PDP in all 50 states to both individuals and employer groups beginning in 2006. Under these annual contracts, CMS pays us a portion of the premium, a portion of, or a capitated fee for, catastrophic drug costs and a portion of the health care costs for low-income Medicare beneficiaries and provides a risk sharing arrangement to limit our exposure to unexpected expenses. Premiums received from, or on behalf of, members or CMS and capitated fees are recognized as premium revenue ratably over the contract period. Costs for covered prescription drugs are expensed as incurred. Low-income costs (deductible, coinsurance, etc.) and the catastrophic drug costs paid in advance by CMS will be recorded as a liability and will offset health care costs when incurred. For individual PDP coverage, the risk sharing arrangement provides a risk corridor whereby the target amount (what we received in premiums from members and CMS based on our annual bid amount less administrative expenses) is compared to our actual drug costs incurred during the contract year. Based on the risk corridor provision and PDP activity to date, an estimated risk sharing receivable or payable is recorded on a quarterly basis as an adjustment to premium revenue. A reconciliation of the final risk sharing, low-income subsidy and catastrophic amounts is performed at the end of the contract year. 3. Acquisition On March 31, 2006, we acquired the disability and leave management businesses of Broadspire Services, Inc. and Broadspire Management Services, Inc. (collectively, “Broadspire Disability”) for approximately $161 million. Broadspire Disability operates as a third party administrator offering absence management services, including short-term and long-term disability administration and leave management to employers. At September 30, 2006, approximately $10 million of the purchase price will be payable upon the resolution of certain future events. We recorded approximately $99 million of goodwill associated with the acquisition of Broadspire Disability, representing the purchase price in excess of the fair value of the net assets acquired (which includes approximately $48 million of intangible assets, primarily consisting of a customer list and technology). 4. Earnings Per Common Share Basic earnings per common share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS is computed similar to basic EPS, except that it reflects the potential dilution that could occur if dilutive securities were exercised or converted into common stock. The computation for basic and diluted EPS from continuing operations for the three and nine months ended September 30, 2006 and 2005 is as follows:

(Millions, except per common share data) 2006 2005 2006 2005 Income from continuing operations 476.4$ 372.8$ 1,251.5$ 1,157.0$

Weighted average shares used to compute basic EPS 536.6 577.4 554.8 581.8 Dilutive effect of outstanding stock-based compensation awards (1) 21.5 25.2 23.5 24.2 Weighted average shares used to compute diluted EPS 558.1 602.6 578.3 606.0

Basic EPS .89$ .65$ 2.26$ 1.99$

Diluted EPS .85$ .62$ 2.16$ 1.91$

Three Months Ended September 30,

Nine Months Ended September 30,

(1) Approximately 5.4 million and 5.3 million stock appreciation rights (with exercise prices ranging from $38.43 to $52.11) were not

included in the calculation of diluted earnings per common share for the three and nine months ended September 30, 2006, respectively, as their exercise prices were greater than the average market price of our common stock during such periods.

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5. Operating Expenses For the three and nine months ended September 30, 2006 and 2005, selling expenses (which include broker commissions, the variable component of our internal sales force compensation and premium taxes) and general and administrative expenses were as follows:

(Millions) 2006 2005 2006 2005 Selling expenses 231.7$ 214.1$ 715.3$ 623.0$ General and administrative expenses: Salaries and related benefits 583.0 541.0 1,728.5 1,674.9 Other general and administrative expenses 342.6 344.1 1,147.8 998.6 Total general and administrative expenses 925.6 885.1 2,876.3 2,673.5 Total operating expenses 1,157.3$ 1,099.2$ 3,591.6$ 3,296.5$

Three Months Ended Nine Months EndedSeptember 30, September 30,

6. Goodwill and Other Acquired Intangible Assets Changes in the carrying amount of goodwill for the nine months ended September 30, 2006 and 2005 were as follows: (Millions) 2006 2005 Balance, beginning of period 4,523.2$ 3,687.8$ Goodwill acquired: Active Health - 310.6 HMS - 240.4 Broadspire Disability 99.0 - SRC - 127.7 Other .5 3.1 Balance, end of the period 4,622.7$ 4,369.6$ Other acquired intangible assets at September 30, 2006 and December 31, 2005 were as follows:

Accumulated Amortization(Millions) Cost Amortization Net Balance Period (Years)September 30, 2006Other acquired intangible assets: Customer lists 1,169.6$ 961.9$ 207.7$ 4-10 Provider networks 696.2 274.8 421.4 12-25 Technology 56.5 17.4 39.1 3-5 Other 32.6 9.6 23.0 3-12 Trademarks 22.3 - 22.3 IndefiniteTotal other acquired intangible assets 1,977.2$ 1,263.7$ 713.5$

December 31, 2005Other acquired intangible assets: Customer lists 1,132.4$ 937.5$ 194.9$ 4-9 Provider networks 696.2 253.2 443.0 12-25 Technology 44.1 6.2 37.9 3-5 Other 29.9 3.1 26.8 3-12 Trademarks 22.3 - 22.3 IndefiniteTotal other acquired intangible assets 1,924.9$ 1,200.0$ 724.9$

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Annual pretax amortization for other acquired intangible assets over the next five calendar years is estimated to be as follows: (Millions)2007 87.2$ 2008 79.8 2009 68.8 2010 65.0 2011 60.3 7. Investments Total investments at September 30, 2006 and December 31, 2005 were as follows:

(Millions) Current Long-term Total Current Long-term TotalDebt securities available for sale: Available for use in current operations 13,127.5$ (1) -$ 13,127.5$ 13,216.9$ (1) -$ 13,216.9$ Loaned securities 895.8 - 895.8 1,115.7 - 1,115.7 On deposit, as required by regulatory authorities - 501.6 (3) 501.6 - 522.4 (3) 522.4 Debt securities available for sale 14,023.3 501.6 14,524.9 14,332.6 522.4 14,855.0 Equity securities available for sale 31.8 (1) 40.3 (3) 72.1 34.5 (1) 26.7 (3) 61.2 Short-term investments 104.0 (1) - 104.0 114.8 (1) - 114.8 Mortgage loans 230.6 (2) 1,381.2 1,611.8 86.7 (2) 1,460.8 1,547.5 Investment real estate - (2) 188.1 188.1 7.4 (2) 207.2 214.6 Other investments 3.5 (2) 1,139.7 (3) 1,143.2 2.7 (2) 1,113.0 (3) 1,115.7 Total investments 14,393.2$ 3,250.9$ 17,644.1$ 14,578.7$ 3,330.1$ 17,908.8$

December 31, 2005September 30, 2006

(1) Included in investment securities on the Consolidated Balance Sheets totaling $13.3 billion and $13.4 billion at September 30, 2006 and

December 31, 2005, respectively. (2) Included in other investments on the Consolidated Balance Sheets totaling $234.1 million and $96.8 million at September 30, 2006 and

December 31, 2005, respectively. (3) Included in long-term investments on the Consolidated Balance Sheets totaling $1.7 billion at both September 30, 2006 and December

31, 2005. Components of net investment income for the three and nine months ended September 30, 2006 and 2005 were as follows:

(Millions) 2006 2005 2006 2005 Debt securities 193.8$ 204.4$ 602.0$ 634.8$ Mortgage loans 36.7 34.5 95.9 98.0 Cash equivalents and other short-term investments 31.6 15.3 85.1 40.4 Other 24.7 35.5 94.5 82.3 Gross investment income 286.8 289.7 877.5 855.5 Less: investment expenses (8.5) (9.8) (25.4) (27.8) Net investment income (1) 278.3$ 279.9$ 852.1$ 827.7$

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) Includes amounts related to experience-rated contract holders of $32.0 million and $100.0 million during the three and nine months

ended September 30, 2006, respectively, and $36.5 million and $110.4 million during the three and nine months ended September 30, 2005, respectively. Interest credited to experience-rated contract holders is included in current and future benefits on the Consolidated Statements of Income.

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Net realized capital gains (losses) for the three and nine months ended September 30, 2006 and 2005, excluding amounts related to experience-rated contract holders and discontinued products, were as follows:

(Millions) 2006 2005 2006 2005 Debt securities 9.1$ 11.1$ 1.2$ 14.5$ Equity securities .4 - 4.3 - Derivatives .6 (4.6) 8.5 (1.6) Real estate 5.4 2.0 9.3 6.0 Other - - (1.4) (.3) Pretax net realized capital gains 15.5$ 8.5$ 21.9$ 18.6$

Three Months Ended Nine Months EndedSeptember 30, September 30,

Net realized capital gains related to experience-rated contract holders of $4 million and $10 million for the three and nine months ended September 30, 2006, respectively, and $5 million and $3 million for the three and nine months ended September 30, 2005, respectively, were deducted from net realized capital gains, and an offsetting amount is reflected in policyholders’ funds. Net realized capital gains related to discontinued products of $8 million and $28 million for the three and nine months ended September 30, 2006, respectively, and $12 million for both the three and nine months ended September 30, 2005 were deducted from net realized capital gains, and an offsetting amount is reflected in the reserve for anticipated future losses on discontinued products (refer to Note 15). 8. Other Comprehensive (Loss) Income Changes in accumulated other comprehensive (loss) income related to changes in net unrealized (losses) gains on securities (excluding those related to experience-rated contract holders and discontinued products) and derivatives for the nine months ended September 30, 2006 and 2005 were as follows: (Millions) 2006 2005 Securities:Net unrealized holding losses arising during the period (1) (46.1)$ (108.0)$ Less: reclassification adjustment for losses included in net income (2) (5.1) (3.2) Net unrealized losses on securities (41.0)$ (104.8)$

Derivatives:Net derivative gains (losses) arising during the period (3) 14.8$ (4.3)$ Less: reclassification adjustment for gains (losses) included in net income (4) 5.7 (1.3) Net derivative gains (losses) 9.1$ (3.0)$

(1) Pretax net unrealized holding losses arising during the nine months ended September 30, 2006 and 2005 were $(70.8) million and $(166.2) million, respectively.

(2) Pretax reclassification adjustments for losses included in net income were $(7.8) million and $(4.9) million for the nine months ended September 30, 2006 and 2005, respectively.

(3) Pretax net derivative gains (losses) arising during the nine months ended September 30, 2006 and 2005 were $22.8 million and $(6.5) million, respectively.

(4) Pretax reclassification adjustments for gains (losses) included in net income were $8.8 million and $(2.0) million for the nine months ended September 30, 2006 and 2005, respectively.

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9. Employee Benefit Plans Defined Benefit Retirement Plans Components of the net periodic benefit cost of our noncontributory defined benefit pension plans and other postretirement benefit (“OPEB”) plans for the three and nine months ended September 30, 2006 and 2005 were as follows:

Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended

(Millions) 2006 2005 2006 2005 2006 2005 2006 2005 Service cost 24.5$ 23.2$ 73.5$ 69.6$ .1$ .1$ .3$ .3$ Interest cost 70.8 68.5 212.4 205.5 6.3 7.0 18.9 21.0 Expected return on plan assets (102.7) (92.6) (308.1) (277.8) (1.0) (1.1) (3.0) (3.3) Amortization of prior service cost 1.4 1.3 4.2 3.9 (.5) (.3) (1.5) (.9) Recognized net actuarial loss 19.3 18.6 57.9 55.8 1.8 1.5 5.4 4.5 Net periodic benefit cost 13.3$ 19.0$ 39.9$ 57.0$ 6.7$ 7.2$ 20.1$ 21.6$

Pension Plans OPEB Plans

September 30, September 30, September 30, September 30,

Stock-Based Compensation Plans Our stock-based compensation plans (the “Plans”) provide for awards of stock options, stock appreciation rights (“SARs”), restricted stock units (“RSUs”), deferred contingent common stock and the ability for employees to purchase common stock at a discount. At September 30, 2006, approximately 101 million common shares were available for issuance under the Plans. Executive, middle management and non-management employees may be granted stock options, SARs and RSUs. Stock options are granted to purchase our common stock at or above the market price on the date of grant. SARs granted will be settled in stock, net of taxes, based on the appreciation of our stock price on the exercise date over the market price on the date of grant. SARs and stock options generally become 100% vested three years after the grant is made, with one-third vesting each year. From time to time, we have issued SARs and stock options with different vesting provisions. Vested SARs and stock options may be exercised at any time during the 10 years after grant, except in certain circumstances, generally related to employment termination or retirement. At the end of the 10-year period, any unexercised SARs and stock options expire. For each RSU granted, employees receive one share of common stock, net of taxes, at the end of the vesting period. The RSUs generally become 100% vested three years from the grant date. We estimate the fair value of stock options and awards of SARs using a modified Black-Scholes option pricing model. The fair value of RSUs is based on the market price of our common stock on the date of grant. Stock options and SARs granted in the three and nine months ended September 30, 2006 had a weighted average fair value of $13.18 and $16.43, respectively, and $13.31 and $10.83, respectively, for the corresponding periods in 2005 using the assumptions noted in the following table:

2006 2005 2006 2005 Dividend yield .1% .1% .1% .1%Expected volatility 33.1% 30.6% 30.9% 31.3%Risk-free interest rate 4.8% 4.1% 4.6% 3.7%Expected term (years) 4.5 4.5 4.5 4.5

Three Months Ended September 30,

Nine Months Ended September 30,

We use historical data to estimate the period of time that stock options or SARs are expected to be outstanding. Expected volatilities are based on a weighted average of the historical volatility of our stock price and implied volatility from traded options on our stock. The risk-free interest rate for periods within the expected life of the stock option or SAR is based on the benchmark five-year U.S. Treasury rate in effect on the date of grant. The dividend yield assumption is based on our historical dividends declared.

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The stock option and SAR transactions for the nine months ended September 30, 2006 were as follows:

Number of Stock Exercise Contractual Intrinsic(Millions, except exercise price) Options or SARs Price Life (Years) ValueStock optionsOutstanding at December 31, 2005 53.4 14.80$ 6.2 1,727.5$ Granted - - - - Exercised (6.9) 10.68 - 231.9 Expired or forfeited (.4) 22.23 - - Outstanding at September 30, 2006 46.1 15.34$ 5.6 1,115.8$

Stock options exercisable at September 30, 2006 40.7 12.97$ 5.2 1,082.4$

SARsOutstanding at December 31, 2005 - -$ - -$ Granted 5.5 49.91 - - Exercised - - - - Expired or forfeited (.1) 50.21 - - Outstanding at September 30, 2006 5.4 49.90$ 9.1 -$ (1)

SARs exercisable at September 30, 2006 .3 50.21$ 4.4 -$

(1) Amounts rounded to zero. During the three and nine months ended September 30, 2006 and 2005, the following activity occurred under our Plans:

(Millions) 2006 2005 2006 2005Cash received from stock option exercises 19.6$ 31.0$ 73.5$ 210.1$ Intrinsic value (the excess of stock price on the date of exercise over the exercise price) 43.0 73.3 231.8 457.0 Tax benefits realized for the tax deductions from stock options exercised (1) 15.1 24.2 81.1 160.7 Fair value of stock options vested (2) 1.6 .4 62.4 69.9

Three Months Ended Nine Months Ended September 30, September 30,

(1) No SARs were exercised during these periods. (2) No SARs vested during these periods. We settle employee stock options with newly issued common stock and generally utilize the proceeds to repurchase common stock in the open market in the same period.

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The following is a summary of information regarding stock options and SARs outstanding and exercisable at September 30, 2006 (number of stock options and SARs and aggregate intrinsic values in millions):

WeightedAverage Weighted Weighted

Remaining Average Aggregate Average AggregateNumber Contractual Exercise Intrinsic Number Exercise Intrinsic

Range of Exercise Prices Outstanding Life (Years) Price Value Exercisable Price ValueStock options$0.00-$5.21 1.3 2.9 4.95$ 43.4$ 1.3 4.95$ 43.4$ 5.21-10.42 14.6 4.3 8.19 457.4 14.6 8.19 457.4 10.42-15.63 13.6 5.0 10.63 392.1 13.5 10.63 391.8 15.63-20.84 8.4 6.8 19.36 169.8 8.4 19.37 168.8 20.84-26.06 .3 7.5 21.95 5.4 .3 21.93 4.7 26.06-31.27 - (1) 8.1 27.54 - (1) - - - 31.27-36.48 7.7 7.9 33.38 47.5 2.6 33.38 16.2 36.48-41.69 .2 8.6 38.90 .2 - (1) 38.83 .1 41.69-46.90 - (1) 8.9 42.16 - - (1) 42.16 - $0.00-$46.90 46.1 5.6 15.34$ 1,115.8$ 40.7 12.97$ 1,082.4$

SARs$31.27-$36.48 - (1) 9.9 35.37$ -$ (1) - -$ -$ 36.48-41.69 .2 9.8 39.90 - (1) - - - 41.69-46.90 - - - - - - - 46.90-52.11 5.2 9.1 50.20 - .3 50.21 - $31.27-$52.11 5.4 9.1 49.90$ -$ .3 50.21$ -$

Outstanding Exercisable

(1) Amounts rounded to zero. RSU transactions for the nine months ended September 30, 2006 were as follows (number of units in millions):

WeightedAverage

Grant DateRSUs Fair Value

RSUs at December 31, 2005 - (1) 34.62$ Granted .8 50.12 Vested - (1) 35.05 Forfeited - (1) 50.21 RSUs at September 30, 2006 .8 49.80$

(1) Amounts rounded to zero. For the three and nine months ended September 30, 2006, we recorded pretax stock-based compensation expense of $12 million and $62 million, respectively, and $8 million and $84 million, respectively, for the corresponding periods in 2005, in general and administrative expenses. We also recorded related tax benefits of $4 million and $22 million for the three and nine months ended September 30, 2006, respectively, and $3 million and $29 million, respectively, for the corresponding periods in 2005. As of September 30, 2006, $89 million of total unrecognized compensation costs related to stock options, SARs and RSUs are expected to be recognized over a weighted-average period of 2.1 years. All of our employees are eligible to participate in our Employee Stock Purchase Plan (the “ESPP”). Employees may contribute a percentage of their base salary through payroll deductions. Contributions are accumulated for a six-month offering period and used to purchase stock at the end of the six-month offering period (the “Purchase Date”). On the Purchase Date, stock is purchased for all participating employees based on the contributions accumulated (subject to a $25,000 annual limit per employee). A six-month accumulation period commenced on December 19, 2005 and ended on June 16, 2006. The purchase price for this offering was at a 5% discount from the closing price of our common stock on the Purchase Date. For the six months ended June 30, 2006,

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approximately .1 million shares of common stock were purchased under the ESPP at the purchase price of $37.27 per share. On June 19, 2006, another six-month accumulation period commenced. This accumulation period ends on December 15, 2006, and the purchase price for this offering is at a 5% discount from the closing price of our common stock on the Purchase Date. 10. Debt The carrying value of long-term debt at September 30, 2006 and December 31, 2005 was as follows: (Millions)Senior notes, 7.375%, due 2006 (1) -$ 450.0$ Senior notes, 5.75%, due 2011 449.5 - Senior notes, 7.875%, due 2011 448.4 448.1 Senior notes, 6.0%, due 2016 745.7 - Senior notes, 6.625%, due 2036 798.4 - Senior notes, 8.50%, due 2041 (2) - 707.6 Total long-term debt 2,442.0 1,605.7 Less current portion of long-term debt (1) - (450.0) Long-term debt, less current portion 2,442.0$ 1,155.7$

September 30, 2006 December 31, 2005

(1) The 7.375% senior notes were repaid in February 2006. (2) The 8.5% senior notes were redeemed and repaid in June 2006. In June 2006, we issued $2.0 billion of senior notes, comprised of $450 million of 5.75% senior notes due 2011, $750 million of 6.0% senior notes due 2016 and $800 million of 6.625% senior notes due 2036. The proceeds from these senior notes were used to redeem the entire $700 million aggregate principal amount of our 8.5% senior notes due 2041 and to repay approximately $400 million of commercial paper borrowings, outstanding since the March 1, 2006 maturity of the entire $450 million aggregate principal amount of our 7.375% senior notes. The remainder of the net proceeds were used for general corporate purposes, including share repurchases. In connection with the redemption of the $700 million, 8.5% senior notes, we wrote-off deferred debt issuance costs associated with these senior notes and recognized the deferred gain from the interest rate swaps that hedged these senior notes (in May 2005, we sold these interest rate swaps; the resulting gain from which was to be amortized over the remaining life of these senior notes). As a result of the foregoing, we recorded an $8 million after tax ($12 million pretax) non-cash charge in operating expenses for the nine months ended September 30, 2006. Additionally, in connection with our June 2006 debt issuance, we terminated the five forward starting swaps (with an aggregate notional value of $1.0 billion) that we entered into between August 2005 and June 2006 in order to hedge the change in cash flows associated with interest payments generated by the forecasted issuance of the senior notes. As a result of the termination of the five forward starting swaps, we received approximately $15 million which was recorded as accumulated other comprehensive income and will be amortized as a reduction of interest expense over the life of the applicable senior notes issued in June 2006. On January 20, 2006, we entered into an amended and restated unsecured $1 billion, five-year revolving credit agreement (the “Facility”) superceding our previously existing credit facility. The Facility also provides for up to $150 million of letters of credit to be issued at our request, which count as usage of the available commitments under the Facility. The Facility permits the aggregate commitments under the Facility to be expanded to a maximum of $1.35 billion upon our agreement with one or more financial institutions. Various interest rate options are available under the Facility. Any revolving borrowings mature on the termination date of the Facility. We pay facility fees on the Facility ranging from .05% to .175% per annum, depending upon our long-term senior unsecured debt rating. The Facility contains a financial covenant that requires us to maintain a ratio of total debt to consolidated capitalization as of the end of each fiscal quarter ending on or after December 31, 2005 at or below .4 to 1.0. For this purpose, consolidated capitalization equals the sum of shareholders’ equity, excluding any minimum pension liability adjustment and any net unrealized capital gains and losses, and total debt (as defined in the Facility). We met this requirement at September 30, 2006.

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In January 2006, certain of our subsidiaries entered in a one-year $45 million variable funding credit program with a bank to provide short-term liquidity to those subsidiaries. Borrowings under this program are secured by certain assets of those subsidiaries. At September 30, 2006, there was $1.5 million outstanding under this program at an interest rate of 6.11%.

11. Capital Stock On September 29, 2005, January 27, 2006, April 28, 2006 and September 29, 2006 the Board authorized four share repurchase programs for the repurchase of up to $750 million, $750 million, $820 million and $750 million, respectively, of common stock ($3.1 billion in aggregate). During the nine month period ended September 30, 2006, we repurchased approximately 52 million shares of common stock at a cost of approximately $2.0 billion (approximately $59 million of these repurchase transactions were settled in early October 2006), completing the September 29, 2005 and January 27, 2006 authorizations and utilizing a portion of the April 28, 2006 authorization. As of September 30, 2006, we had authorization to repurchase up to approximately $937 million of common stock remaining under the April 28, 2006 and September 29, 2006 authorizations. In connection with the stock split described in Note 1, the Board approved an amendment to our Articles of Incorporation. The amendment increased the number of common shares we may issue to 2.9 billion shares effective February 17, 2006 (which has subsequently been reduced due to our share repurchase activity). This increase is in the same proportion that the shares distributed in the stock dividend increased the number of issued common shares. On September 29, 2006, the Board declared an annual cash dividend of $.04 per share to shareholders of record at the close of business on November 15, 2006. The dividend will be paid on November 30, 2006.

12. Dividend Restrictions and Statutory Surplus Under regulatory requirements as of September 30, 2006, the amount of dividends that may be paid through the end of 2006 by our insurance and HMO subsidiaries to Aetna without prior approval by regulatory authorities is approximately $336 million in the aggregate. There are no such restrictions on distributions from Aetna to its shareholders. At September 30, 2006, the combined statutory capital and surplus of our insurance and HMO subsidiaries was $4.4 billion. At December 31, 2005, such capital and surplus was $4.5 billion. 13. Commitments and Contingencies Managed Care Class Action Litigation From 1999 through early 2003, we were involved in purported class action lawsuits as part of a wave of similar actions targeting the health care payor industry and, in particular, the conduct of business by managed care companies. These cases, brought on behalf of health care providers (the “Provider Cases”), alleged generally that we and other defendant managed care organizations engaged in coercive behavior or a variety of improper business practices in dealing with health care providers and conspired with one another regarding this purported wrongful conduct. Effective May 21, 2003, we and representatives of over 900,000 physicians, state and other medical societies entered into an agreement (the “Physician Settlement Agreement”) settling the lead physician Provider Case, which was pending in the United States District Court for the Southern District of Florida (the “Florida Federal Court”). We believe that the Physician Settlement Agreement, which has received final court approval, resolved all then pending Provider Cases filed on behalf of physicians that did not opt out of the settlement. During the second quarter of 2003, we recorded a charge of $75 million ($115 million pretax) (included in other operating expenses) in connection with the Physician Settlement Agreement, net of an estimated insurance recoverable of $72 million pretax. We believe our insurance policies with third party insurers apply to this matter and have been vigorously pursuing recovery from those insurers in Pennsylvania state court (the “Coverage Litigation”). During the second quarter of 2006, the Philadelphia, Pennsylvania state trial court issued a summary judgment ruling

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dismissing all of our claims in the Coverage Litigation. We have appealed that ruling and intend to continue to vigorously pursue recovery from our third party insurers. However, as a result of that ruling, we concluded that the estimated insurance recoverable of $72 million pretax that was recorded in connection with the Physician Settlement Agreement is no longer probable of collection for accounting purposes, and therefore, during the second quarter of 2006, we wrote-off that recoverable. We continue to work with plaintiffs’ representatives in implementing the Physician Settlement Agreement and the issues that may arise under that agreement. Several Provider Cases filed in 2003 on behalf of purported classes of chiropractors and/or all non-physician health care providers also make factual and legal allegations similar to those contained in the other Provider Cases, including allegations of violations of the Racketeer Influenced and Corrupt Organizations Act. These Provider Cases seek various forms of relief, including unspecified damages, treble damages, punitive damages and injunctive relief. These Provider Cases have been transferred to the Florida Federal Court for consolidated pretrial proceedings. We intend to defend each of these cases vigorously. Insurance Industry Brokerage Practices Matters We have received subpoenas and other requests for information from the New York Attorney General, the Connecticut Attorney General, other attorneys general and various insurance and other regulators with respect to an industry wide investigation into certain insurance brokerage practices, including broker compensation arrangements, bid quoting practices and potential antitrust violations. We may receive additional subpoenas and requests for information from these attorneys general and regulators. We are cooperating with these inquiries. In connection with this industry wide review, we have received, and may receive, additional subpoenas and requests for information from other attorneys general and other regulators, and we have been named in related litigation. Other Litigation and Regulatory Proceedings We are involved in numerous other lawsuits arising, for the most part, in the ordinary course of our business operations, including employment litigation and claims of bad faith, medical malpractice, non-compliance with state regulatory regimes, marketing misconduct, failure to timely pay medical claims, investment activities, patent infringement and other intellectual property litigation and other litigation in our Health Care and Group Insurance businesses. Some of these other lawsuits are or are purported to be class actions. We intend to defend these matters vigorously. In addition, our current and past business practices are subject to review by, and from time to time we receive subpoenas and other requests for information from, various state insurance and health care regulatory authorities and other state and federal authorities. There also continues to be heightened review by regulatory authorities of the managed health care industry’s business practices, including utilization management, delegated arrangements and claim payment practices. As a leading national managed care organization, we regularly are the subject of such reviews. These reviews may result, and have resulted, in changes to or clarifications of our business practices, as well as fines, penalties or other sanctions. We are unable to predict at this time the ultimate outcome of the remaining Provider Cases, the insurance industry brokerage practices matters or other litigation and regulatory proceedings, and it is reasonably possible that their outcome could be material to us.

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14. Segment Information Summarized financial information of our segments for the three and nine months ended September 30, 2006 and 2005 were as follows:

Health Group Large Case Corporate Total(Millions) Care Insurance Pensions Interest CompanyThree months ended September 30, 2006Revenue from external customers 5,503.4$ 449.5$ 52.8$ -$ 6,005.7$ Operating earnings (loss) (1) 447.0 34.6 10.6 (25.9) 466.3

Three months ended September 30, 2005Revenue from external customers 4,907.3$ 445.9$ 59.1$ -$ 5,412.3$ Operating earnings (loss) (1) 346.5 32.3 9.6 (21.1) 367.3

Nine months ended September 30, 2006Revenue from external customers 16,361.0$ 1,391.1$ 160.1$ -$ 17,912.2$ Operating earnings (loss) (1) 1,160.5 102.8 30.0 (69.6) 1,223.7

Nine months ended September 30, 2005Revenue from external customers 14,251.0$ 1,361.0$ 166.2$ -$ 15,778.2$ Operating earnings (loss) (1) 1,046.2 92.7 21.2 (58.6) 1,101.5

(1) Operating earnings (loss) excludes net realized capital gains or losses and the other items described in the reconciliation below.

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The following table reconciles operating earnings to income from continuing operations in the Consolidated Statements of Income for the three and nine months ended September 30, 2006 and 2005:

(Millions) 2006 2005 2006 2005 Operating earnings 466.3$ 367.3$ 1,223.7$ 1,101.5$ Net realized capital gains, net of tax 10.1 5.5 14.2 12.1 Reduction of reserve for anticipated future losses on discontinued products (1) - - 75.0 43.4 Physician class action settlement insurance-related charge (2) - - (47.1) - Debt refinancing charge (3) - - (8.1) - Acquisition-related software charge (4) - - (6.2) - Income from continuing operations 476.4$ 372.8$ 1,251.5$ 1,157.0$

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) We reduced the reserve for anticipated future losses on discontinued products by $75.0 million ($115.4 million pretax) and $43.4

million ($66.7 million pretax) in the nine months ended September 30, 2006 and 2005, respectively. We believe excluding any changes to the reserve for anticipated future losses on discontinued products provides more useful information as to our continuing products and is consistent with the treatment of the results of operations of these discontinued products, which are credited/charged to the reserve and do not affect our results of operations. Refer to Note 15 for additional information on the reduction of the reserve for anticipated future losses on discontinued products.

(2) As a result of a trial court’s ruling in the nine months ended September 30, 2006, we concluded that a $72.4 million pretax receivable from third party insurers related to certain litigation we settled in 2003 was no longer probable of collection for accounting purposes. As a result, we wrote-off this receivable in the nine months ended September 30, 2006. 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 nine months ended September 30, 2006 (refer to Note 13).

(3) In connection with the issuance of $2.0 billion of our senior notes in the nine months ended September 30, 2006, we redeemed all $700 million of our 8.5% senior notes due 2041. In connection with this redemption, we wrote-off debt issuance costs associated with the 8.5% senior notes due 2041 and recognized the deferred gain from the interest rate swaps that had hedged the 8.5% senior notes due 2041 (in May 2005, we sold these interest rate swaps; the resulting gain from which was to be amortized over the remaining life of the 8.5% senior notes due 2041). As a result of the foregoing, we recorded an $8.1 million ($12.4 million pretax) net charge in the nine months ended September 30, 2006. 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 nine months ended September 30, 2006 (refer to Note 10).

(4) As a result of the acquisition of Broadspire Disability in the nine months ended September 30, 2006, we acquired certain software which eliminated the need for similar software that we had been developing internally. As a result, we ceased our own software development and impaired amounts previously capitalized, resulting in a $6.2 million ($8.3 million pretax) charge to net income, reflected in general and administrative expenses for the nine months ended September 30, 2006. This charge does not reflect the underlying business performance of Group Insurance.

15. Discontinued Products We discontinued the sale of our fully guaranteed large case pension products (single-premium annuities (“SPAs”) and guaranteed investment contracts (“GICs”)) in 1993. Under our accounting for these discontinued products, a reserve for anticipated future losses from these products was established, and we review it quarterly. As long as the reserve continues to represent our then best estimate of expected future losses, results of operations of the discontinued products, including net realized capital gains and losses, are credited/charged to the reserve and do not affect our results of operations. Our results of operations would be adversely affected to the extent that future losses on the products are greater than anticipated and favorably affected to the extent that future losses are less than anticipated. The current reserve reflects our best estimate of anticipated future losses. The factors contributing to changes in the reserve for anticipated future losses are: operating income or loss, realized capital gains or losses and mortality gains or losses. Operating income or loss is equal to revenue less expenses. Realized capital gains or losses reflect the excess (deficit) of sales price over (below) the carrying value of assets sold and any other-than-temporary impairments. Mortality gains or losses reflect the mortality and retirement experience related to SPAs. A mortality gain (loss) occurs when an annuitant or a beneficiary dies sooner (later) than expected. A retirement gain (loss) occurs when an annuitant retires later (earlier) than expected.

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At the time of discontinuance, a receivable from Large Case Pensions’ continuing products equivalent to the net present value of the anticipated cash flow shortfalls was established for the discontinued products. Interest on the receivable is accrued at the discount rate that was used to calculate the reserve. The offsetting payable, on which interest is similarly accrued, is reflected in continuing products. Interest on the payable generally offsets the investment income on the assets available to fund the shortfall. At September 30, 2006, the receivable from continuing products, net of related deferred taxes payable of $135 million on accrued interest income, was $311 million. At December 31, 2005, the receivable from continuing products, net of related deferred taxes payable of $127 million on accrued interest income, was $372 million. These amounts were eliminated in consolidation. Results of discontinued products for the three and nine months ended September 30, 2006 and 2005 were as follows (pretax):

Charged (Credited)to Reserve for

(Millions) Results Future Losses Net (1)

Three months ended September 30, 2006Net investment income 76.8$ -$ 76.8$ Net realized capital gains 7.9 (7.9) - Interest earned on receivable from continuing products 6.7 - 6.7 Other revenue 2.8 - 2.8 Total revenue 94.2 (7.9) 86.3 Current and future benefits 82.3 .8 83.1 Operating expenses 3.2 - 3.2 Total benefits and expenses 85.5 .8 86.3 Results of discontinued products 8.7$ (8.7)$ -$

Three months ended September 30, 2005Net investment income 72.3$ -$ 72.3$ Net realized capital gains 12.3 (12.3) - Interest earned on receivable from continuing products 7.4 - 7.4 Other revenue 3.8 - 3.8 Total revenue 95.8 (12.3) 83.5 Current and future benefits 85.2 (5.1) 80.1 Operating expenses 3.4 - 3.4 Total benefits and expenses 88.6 (5.1) 83.5 Results of discontinued products 7.2$ (7.2)$ -$

Nine months ended September 30, 2006Net investment income 236.2$ -$ 236.2$ Net realized capital gains 28.4 (28.4) - Interest earned on receivable from continuing products 22.1 - 22.1 Other revenue 13.9 - 13.9 Total revenue 300.6 (28.4) 272.2 Current and future benefits 249.0 14.4 263.4 Operating expenses 8.8 - 8.8 Total benefits and expenses 257.8 14.4 272.2 Results of discontinued products 42.8$ (42.8)$ -$

Nine months ended September 30, 2005Net investment income 248.0$ -$ 248.0$ Net realized capital gains 12.2 (12.2) - Interest earned on receivable from continuing products 23.1 - 23.1 Other revenue 16.3 - 16.3 Total revenue 299.6 (12.2) 287.4 Current and future benefits 258.2 21.1 279.3 Operating expenses 8.1 - 8.1 Total benefits and expenses 266.3 21.1 287.4 Results of discontinued products 33.3$ (33.3)$ -$

(1) Amounts are reflected in the September 30, 2006 and 2005 Consolidated Statements of Income, except for interest earned on the

receivable from continuing products, which was eliminated in consolidation.

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Assets and liabilities supporting discontinued products at September 30, 2006 and December 31, 2005 were as follows: (1)

September 30, December 31,

(Millions) 2006 2005 Assets: Debt securities available for sale 2,897.0$ 3,032.3$ Equity securities available for sale 56.4 43.1 Mortgage loans 641.8 644.9 Investment real estate 81.0 103.6 Loaned securities 230.0 289.3 Other investments (2) 662.8 603.3 Total investments 4,569.0 4,716.5 Collateral received under securities loan agreements 237.3 295.4 Current and deferred income taxes 107.8 88.9 Receivable from continuing products (3) 445.9 498.8 Total assets 5,360.0$ 5,599.6$

Liabilities: Future policy benefits 3,804.7$ 3,908.4$ Policyholders' funds 24.6 23.5 Reserve for anticipated future losses on discontinued products 1,021.2 1,052.2 Collateral payable under securities loan agreements 237.3 295.4 Other liabilities 272.2 320.1 Total liabilities 5,360.0$ 5,599.6$

(1) Assets supporting the discontinued products are distinguished from assets supporting continuing products. (2) Includes debt securities on deposit as required by regulatory authorities of $21.8 million and $21.3 million at September 30, 2006

and December 31, 2005, respectively. These securities are considered restricted assets and were included in long-term investments on the Consolidated Balance Sheets.

(3) The receivable from continuing products is eliminated in consolidation. At September 30, 2006 and December 31, 2005, net unrealized capital gains on debt securities available for sale are included above in other liabilities and are not reflected in consolidated shareholders’ equity. The reserve for anticipated future losses is included in future policy benefits on the Consolidated Balance Sheets. The reserve for anticipated future losses on discontinued products represents the present value (at a risk-free rate of return at the time of discontinuance, consistent with the duration of the liabilities) of the difference between the expected cash flows from the assets supporting discontinued products and the cash flows expected to be required to meet the obligations of the outstanding contracts. Calculation of the reserve for anticipated future losses requires projection of both the amount and the timing of cash flows over approximately the next 30 years, including consideration of, among other things, future investment results, participant withdrawal and mortality rates as well as the cost of asset management and customer service. Since 1993, there have been no significant changes to the assumptions underlying the calculation of the reserve related to the projection of the amount and timing of cash flows, except as noted below. The projection of future investment results considers assumptions for interest rates, bond discount rates and performance of mortgage loans and real estate. Mortgage loan cash flow assumptions represent management’s best estimate of current and future levels of rent growth, vacancy and expenses based upon market conditions at each reporting date. The performance of real estate assets has been consistently estimated using the most recent forecasts available. Since 1997, a bond default assumption has been included to reflect historical default experience, since the bond portfolio increased as a percentage of the overall investment portfolio and reflected more bond credit risk, concurrent with the declines in the commercial mortgage loan and real estate portfolios. The previous years’ actual participant withdrawal experience is used for the current year assumption. Prior to 1995, the Company used the 1983 Group Annuitant Mortality table published by the Society of Actuaries (the “Society”). In 1995, the Society published the 1994 Uninsured Pensioner’s Mortality table, which we have used since then.

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Our assumptions about the cost of asset management and customer service reflect actual investment and general expenses allocated over invested assets. The activity in the reserve for anticipated future losses on discontinued products for the nine months ended September 30, 2006 was as follows (pretax): (Millions)Reserve for anticipated future losses on discontinued products at December 31, 2005 1,052.2$ Operating income 9.2 Net realized capital gains 28.4 Mortality and other 5.2 Tax benefits (1) 41.6 Reserve reduction (115.4) Reserve for anticipated future losses on discontinued products at September 30, 2006 1,021.2$

(1) Amount represents tax credits primarily from tax advantaged investments which were reclassified within the liabilities supporting discontinued products from deferred tax liabilities.

Management reviews the adequacy of the discontinued products reserve quarterly and, as a result, $115 million ($75 million after tax) and $67 million ($43 million after tax) of the reserve was released in the nine months ended September 30, 2006, and 2005, respectively, primarily due to favorable investment performance and favorable mortality and retirement experience compared to assumptions underlying the reserve calculation. 16. Discontinued Operations On July 8, 2004, we were notified that the Congressional Joint Committee on Taxation approved a tax refund of approximately $740 million, including interest, relating to businesses that were sold in the 1990s by our former parent company. Also in 2004, we filed for, and were approved for, an additional $35 million tax refund related to other businesses that were sold by our former parent company. The tax refunds were recorded as income from discontinued operations in 2004. We received approximately $666 million of the tax refunds during 2004 and $69 million in 2005. We received the final approximately $50 million payment of these refunds in February 2006, which resulted in an additional $16 million of income from discontinued operations for the nine months ended September 30, 2006.

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Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders Aetna Inc.: We have reviewed the consolidated balance sheet of Aetna Inc. and subsidiaries as of September 30, 2006, the related consolidated statements of income for the three-month and nine-month periods ended September 30, 2006 and 2005 and the related consolidated statements of shareholders’ equity and cash flows for the nine-month periods ended September 30, 2006 and 2005. These condensed consolidated financial statements are the responsibility of the Company’s management. We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles. We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Aetna Inc. and subsidiaries as of December 31, 2005, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 1, 2006, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2005, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ KPMG LLP Hartford, Connecticut October 26, 2006

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) Unless the context otherwise requires, references to the terms “we,” “our” or “us” used throughout this MD&A refer to Aetna Inc. (“Aetna”) and its subsidiaries (collectively, the “Company”). OVERVIEW We are one of the nation’s leading diversified health care benefits companies, serving approximately 29.8 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, long-term care and disability plans, and medical management capabilities. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans and government-sponsored plans. 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 as of September 30, 2006 and December 31, 2005 and results of operations for the three and nine months ended September 30, 2006 and 2005. 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 2005 Annual Report on Form 10-K (the “2005 Annual Report”). This Overview is qualified in its entirety by the full MD&A. Our operating profit for the three and nine months ended September 30, 2006, compared to the corresponding periods in 2005, reflects growth in our Heath Care business. The increase in our operating profit primarily reflects growth in revenue from increases in membership levels and rate increases for renewing membership in 2006 as well as continued general and administrative expense efficiencies. We experienced membership growth in both our Risk (where we assume all or a majority of risk for medical and dental care costs) and administrative services contract (“ASC”) products. As of September 30, 2006, we served approximately 15.4 million medical members (consisting of approximately 34% Risk members and 66% ASC members), 13.4 million dental members, 10.2 million pharmacy members and 15.3 million group insurance members. Our operating profit for the nine months ended September 30, 2006 increased even though we experienced a higher Commercial Risk medical cost ratio in our Health Care segment during 2006. We continued to generate strong cash flows from operations in 2006. Cash flows provided by operating activities in 2006 reflect the receipt of approximately $50 million, representing the final refund payment from the completion of certain Internal Revenue Service audits associated with businesses previously sold by our former parent company (refer to Note 16 of Condensed Notes to Consolidated Financial Statements for additional information). Operating cash flows were used to fund ordinary course operating activities and to make $245 million in voluntary contributions to our pension plan. Other sources and uses of cash include the proceeds from our 2006 debt offering and repurchases of our common stock, respectively. In June 2006, we issued $2.0 billion of senior notes, the proceeds of which were used to redeem our 8.5% senior notes, to repay approximately $400 million of commercial paper borrowings and for general corporate purposes, including share repurchases. Refer to Liquidity and Capital Resources – Financings, Financing Capacity and Capitalization and Note 10 of Condensed Notes to Consolidated Financial Statements for additional information. We also continued our share repurchase programs during the nine months ended September 30, 2006, repurchasing 52 million shares of our common stock at a cost of approximately $2.0 billion (approximately $59 million of these repurchase transactions were settled in early October 2006).

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Effective January 1, 2006, we adopted Statement of Financial Accounting Standards (“FAS”) No. 123 Revised, “Share-Based Payment” (“FAS 123R”). FAS 123R requires us to expense the fair value of all stock-based compensation awards issued to employees and non-employees. Stock-based compensation expense is measured at the grant date, based on the fair value of the award. The expense is recognized over the requisite service period, which primarily is the vesting period, except for retirement eligible individuals for whom a majority of the expense is recognized in the year of grant. We applied the modified-retrospective approach of adopting FAS 123R and accordingly, all prior period financial information was adjusted to reflect our stock compensation activity since 1995. We recorded stock-based compensation expense, included in general and administrative expenses, of $8 million ($12 million pretax) and $5 million ($8 million pretax), representing $.01 per common share each, in the third quarter of 2006 and 2005, respectively, and $40 million ($62 million pretax) and $55 million ($84 million pretax), representing $.07 and $.09 per common share, for the nine months ended September 30, 2006 and 2005, respectively. Stock-based compensation expense is recorded in each of our segments (primarily Health Care and Group Insurance). Refer to our segment results below and Notes 2 and 9 of Condensed Notes to Consolidated Financial Statements for additional information. Summary of Consolidated Results for the Three and Nine Months Ended September 30, 2006 and 2005:

(Millions, except per share amounts) 2006 2005 2006 2005 Total revenues 6,299.5$ 5,700.7$ 18,786.2$ 16,624.5$ Income from continuing operations (1) 476.4 372.8 1,251.5 1,157.0 Net income (2) 476.4 372.8 1,267.6 1,157.0 Income from continuing operations per common share .85 .62 2.16 1.91 Net income per common share .85 .62 2.19 1.91

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) Income from continuing operations for the three months ended September 30, 2006 and 2005 reflects favorable development of prior period

health care cost estimates of approximately $29 million ($45 million pretax) and $15 million ($24 million pretax), respectively. Income from continuing operations for the nine months ended September 30, 2005 reflects the release of approximately $65 million ($103 million pretax) of reserves related to the New York Market Stabilization Pool. This development was recorded in the Health Care segment and is discussed in further detail below in the discussion of Health Care results. Other items reflected in income from continuing operations include:

For the nine months ended September 30, 2006 and 2005 we reduced the reserve for anticipated future losses on discontinued products in the Large Case Pensions segment by $75.0 million ($115.4 million pretax) and $43.4 million ($66.7 million pretax), respectively.

For the nine months ended September 30, 2006 we recorded a charge of $47.1 million ($72.4 million pretax) in connection with the write off of an insurance recoverable as a result of a trial court summary judgment ruling (refer to Note 13 of Condensed Notes to Consolidated Financial Statements), and a net charge of $8.1 million ($12.4 million pretax) related to the write off of debt issuance costs and the recognition of deferred gains on terminated interest rate swaps in connection with the redemption of our 8.5% senior notes due 2041 (refer to Note 10 of Condensed Notes to Consolidated Financial Statements). Both of these charges are reflected in the Health Care segment.

As a result of the acquisition of Broadspire Disability in the first quarter of 2006, we acquired certain software which eliminated the need for similar software we had been developing internally. As a result, we ceased our own software development and impaired amounts previously capitalized, resulting in a $6.2 million ($8.3 million pretax) charge to net income, reflected in general and administrative expenses for the nine months ended September 30, 2006 in the Group Insurance segment.

(2) Net income for the nine months ended September 30, 2006 includes income from discontinued operations of $16.1 million related to the completion of certain Internal Revenue Service audits associated with businesses previously sold by our former parent company.

Management Update Effective October 1, 2006, Chief Executive Officer and President Ronald A. Williams was appointed Chairman of the Board succeeding John W. Rowe, M.D. who retired from Aetna and Aetna’s Board of Directors (the “Board”) on that date. In connection with his retirement, Dr. Rowe and Aetna entered into a consulting agreement on terms previously disclosed. On April 27, 2006, we announced that Alan M. Bennett, Senior Vice President and Chief Financial Officer, plans to retire in the first quarter of 2007. Mr. Bennett has been our Chief Financial Officer since 2001. We are conducting a comprehensive search for a replacement, and Mr. Bennett is assisting us in the process to assure an orderly transition.

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Acquisition of Broadspire Disability Business On March 31, 2006, we acquired the disability and leave management businesses of Broadspire Services, Inc. and Broadspire Management Services, Inc. (collectively, “Broadspire Disability”) for approximately $161 million. Broadspire Disability operates as a third party administrator, offering absence management services, including short-term and long-term disability administration and leave management, to employers. Severance Charge In the fourth quarter of 2006, we will record an after tax severance charge of approximately $16 million ($24 million pretax) related to ongoing initiatives intended to streamline our organization, align our resources and reduce general and administrative expenses. This charge will consist of costs related to actions under a plan of involuntary termination of employees and will include the elimination of approximately 650 positions. 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 FAS No. 131, Disclosures about Segments of an Enterprise and Related Information, and is consistent with our segment disclosure included in Note 14 of Condensed Notes to Consolidated Financial Statements. 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 from net income reported in accordance with U.S. generally accepted accounting principles (“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. 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 from net income to arrive at operating earnings should those other items similarly not relate to the ordinary course of our business. 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 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. We also display certain medical cost ratios excluding development of prior period health costs estimates. As described in the discussion of “Critical Accounting Estimates – Health Care Costs Payable,” each quarter, we reexamine previously established estimates of health care costs payable based on actual claim submissions and other changes in facts and circumstances. Decreases (increases) in prior periods’ health care cost estimates represent the effect of favorable (unfavorable) development of prior period health care cost estimates on current period results of operations at each financial statement date. We believe excluding development of prior period health care cost estimates better reflects our underlying current period health care costs. HEALTH CARE Health Care consists of medical, pharmacy benefits management and dental and vision plans offered on both a Risk basis and an ASC basis (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs). Medical plans include point-of-service (“POS”), health maintenance organization, preferred provider organization (“PPO”) and indemnity benefit products. Medical plans also include health savings accounts (“HSAs”) and Aetna HealthFund®, consumer-directed health plans that combine traditional POS or PPO and/or dental coverage, subject to a deductible, with an accumulating benefit account. Health Care also offers 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.

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Operating Summary for the Three and Nine Months Ended September 30, 2006 and 2005:

(Millions) 2006 2005 2006 2005 Premiums: Commerical Risk (1) 4,350.2$ 4,039.3$ 12,972.6$ 11,742.0$ Medicare 469.0 252.0 1,334.6 748.5 Medicaid 1.1 - 1.1 - Total premiums 4,820.3 4,291.3 14,308.3 12,490.5 Fees and other revenue 683.1 616.0 2,052.7 1,760.5 Net investment income 84.7 76.9 249.3 218.2 Net realized capital gains 3.5 1.9 2.3 7.7 Total revenue 5,591.6 4,986.1 16,612.6 14,476.9 Health care costs (2) 3,797.4 3,390.4 11,481.9 9,683.6 Operating expenses: Selling expenses 212.0 193.5 651.2 562.5 General and administrative expenses (3) 862.6 838.3 2,694.9 2,534.5 Total operating expenses 1,074.6 1,031.8 3,346.1 3,097.0 Amortization of other acquired intangible assets 20.2 15.9 60.2 38.1 Total benefits and expenses 4,892.2 4,438.1 14,888.2 12,818.7 Income before income taxes 699.4 548.0 1,724.4 1,658.2 Income taxes 250.1 200.3 617.6 607.0 Net income 449.3$ 347.7$ 1,106.8$ 1,051.2$

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) Commercial Risk includes all health care risk products, except Medicare and Medicaid. (2) The percentage of health care costs related to capitated arrangements (a fee arrangement where we pay providers a monthly fixed fee

for each member, regardless of the medical services provided to the member) was 5.8% for both the three and nine months ended September 30, 2006, respectively, compared to 7.8% and 8.1%, respectively, for the corresponding periods in 2005.

(3) Includes salaries and related benefit expenses of $540.4 million and $1.6 billion for the three and nine months ended September 30, 2006, respectively, and $511.6 million and $1.6 billion, respectively, for the corresponding periods in 2005.

The table presented below reconciles operating earnings to net income reported in accordance with GAAP for the three and nine months ended September 30, 2006 and 2005:

(Millions) 2006 2005 2006 2005 Net income 449.3$ 347.7$ 1,106.8$ 1,051.2$ Other items included in net income: Net realized capital gains (2.3) (1.2) (1.5) (5.0) Physicians class action settlement insurance-related charge (1) - - 47.1 - Debt refinancing charge (2) - - 8.1 - Operating earnings 447.0$ 346.5$ 1,160.5$ 1,046.2$

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) As a result of a trial court’s ruling in the second quarter of 2006, we concluded that a $72.4 million pretax receivable from third party

insurers related to certain litigation we settled in 2003 was no longer probable of collection for accounting purposes. As a result, we wrote off this receivable in the second quarter of 2006. 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 nine months ended September 30, 2006.

(2) In connection with the issuance of $2.0 billion of our senior notes in the second quarter of 2006, we redeemed all $700 million of our 8.5% senior notes due 2041. In connection with this redemption, we wrote off debt issuance costs associated with the 8.5% senior notes due 2041 and recognized the deferred gain from the interest rate swaps that had hedged the 8.5% senior notes due 2041 (in May 2005, we sold these interest rate swaps; the resulting gain from which was to be amortized over the remaining life of the 8.5% senior notes due 2041). As a result of the foregoing, we recorded an $8.1 million ($12.4 million pretax) net charge in the second quarter of 2006. 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 nine months ended September 30, 2006.

The increase in operating earnings for the three and nine months ended September 30, 2006 when compared to the corresponding periods in 2005 reflects growth in premiums and fees and other revenue and improved 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 (refer to “Membership”) (including the premiums from our new Medicare Part D product offering, effective January 1, 2006) and rate increases for renewing membership. Total operating expenses for the three months ended September 30, 2006 increased due to higher selling expenses

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(reflecting an increase in commissionable premiums from membership growth) and increases in general and administrative expenses due to higher employee related costs, outside services and other expenses associated with higher membership. Total operating expenses for the nine months ended September 30, 2006 also reflect the write-off of an insurance recoverable and a net charge related to our 2006 debt issuance. Despite the overall increase in operating expenses (including the other items in net income for the nine months ended September 30, 2006), our operating expense efficiency improved in 2006 when compared to 2005. Additionally, operating earnings for the three months ended September 30, 2006 reflect higher total underwriting margins due to growth in premiums (as discussed above) that outpaced growth in health care costs. For the nine months ended September 30, 2006, underwriting margins were comparable to the corresponding period in 2005, reflecting growth in premiums (as discussed above) offset by higher health care costs. Our operating earnings for the nine months ended September 30, 2005 reflect the release of approximately $103 million pretax of reserves related to the New York Market Stabilization Pool for the nine months ended September 30, 2005. Our medical cost ratios and reserve development are discussed in the Commercial Risk and Medicare results below. Our Commercial Risk results continued to grow for the three and nine months ended September 30, 2006 Commercial Risk premiums increased approximately $311 million and $1.2 billion for the three and nine months ended September 30, 2006, respectively, when compared to the corresponding periods in 2005. These increases reflect premium rate increases on renewing business and increased membership levels. Our Commercial Risk medical cost ratio was 78.6% for the three months ended September 30, 2006 and 2005. Health care costs reflect favorable development of prior period health care cost estimates of approximately $33 million and $15 million pretax for the three months ended September 30, 2006 and 2005, respectively. Refer to “Critical Accounting Estimates - Health Care Costs Payable” below for more information on our process for establishing our Health Care Costs Payable. Excluding the favorable development of prior period health care cost estimates, the adjusted Commercial Risk medical cost ratio was 79.3% and 79.0% for the three months ended September 30, 2006 and 2005, respectively (refer to the reconciliations of Commercial Risk health care costs to adjusted Commercial Risk health care costs below). The slight increase in our Commercial Risk medical cost ratio for the third quarter 2006 reflects 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 by increases in costs related to inpatient and outpatient services, as well as physician, pharmacy and ancillary services.

(Millions) 2006 2005 Commercial Risk health care costs (included in total health care costs above) 3,417.7$ 3,174.9$ Approximate favorable development of prior period health care cost estimates 33.0 15.0 Adjusted Commercial Risk health care costs 3,450.7$ 3,189.9$

Three Months Ended September 30,

Our Commercial Risk medical cost ratio was 79.7% for the nine months ended September 30, 2006, compared to 76.9% for the corresponding period in 2005. The increase in our Commercial Risk medical cost ratio in 2006 when compared to 2005 reflects lower favorable development of prior period health care cost estimates in 2006 when compared to 2005 (which included a release of approximately $103 million pretax of reserves related to the New York Market Stabilization Pool), as well as 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 in 2006 reflects an increase in high dollar claims. Additionally, although per member premiums increased in 2006, when compared to 2005, the increase was moderated by certain observed competitive pricing behaviors of our small group customer competitors.

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Medicare results for the three and nine months ended September 30, 2006 reflect growth from the corresponding periods in 2005. Medicare premiums increased approximately $217 million and $586 million for the three and nine months ended September 30, 2006, respectively, when compared to the corresponding periods in 2005. This increase reflects increases in payments from the Centers for Medicare and Medicaid Services (“CMS”) and members participating in the new Medicare Part D prescription drug program which was effective January 1, 2006, as well as increased payments from both CMS and members for previously existing Medicare Advantage business due to higher membership levels. In the three months ended September 30, 2006, we also received payments from CMS representing a true-up of Medicare Advantage premium rates based on contractually specified risk adjustments. The majority of the premium true-up related to premiums earned in the six months ended June 30, 2006. Medicare premiums for the remainder of 2006 will reflect the higher risk adjusted premium rates. The Medicare medical cost ratio for the three months ended September 30, 2006 was 80.7%, compared to 85.5% for the corresponding period in 2005. Health care costs for the third quarter of 2006 and 2005 reflect favorable development of prior period health care cost estimates of approximately $12 million and $9 million pretax, respectively. Excluding this development, the adjusted Medicare medical cost ratio was 83.2% and 89.1% for the three months ended September 30, 2006 and 2005, respectively (refer to the reconciliations of Medicare health care costs to adjusted Medicare health care costs below). The decrease in the adjusted Medicare medical cost ratio for the third quarter of 2006 was driven by a change in our product mix as a result of the introduction of the Medicare Prescription Drug Plan (“PDP”) and the premium true-up payments we received from CMS in the three months ended September 30, 2006 (discussed above).

(Millions) 2006 2005 Medicare health care costs (included in total health care costs above) 378.4$ 215.5$ Approximate favorable development of prior period health care cost estimates 12.0 9.0 Adjusted Medicare health care costs 390.4$ 224.5$

Three Months Ended September 30,

The Medicare medical cost ratio was 85.7% for the nine months ended September 30, 2006, compared to 86.6% for the corresponding period in 2005. The decrease reflects higher reimbursement rates related to our Medicare Advantage business and a change in our product mix as a result of the introduction of the PDP. Other Sources of Revenue Fees and other revenue increased approximately $67 million and $292 million for the three and nine months ended September 30, 2006, respectively, when compared to the corresponding periods in 2005, reflecting ASC membership growth, rate increases, sales of add-on services and other revenue from our recent acquisitions. Net investment income increased approximately $8 million and $31 million for the three and nine months ended September 30, 2006, respectively, when compared to the corresponding periods in 2005, due primarily to higher average yields in our investment portfolio. Net realized capital gains for the three months ended September 30, 2006 were due primarily to gains on the sale of debt securities from rebalancing our investment portfolio and real estate gains. Net realized capital gains for the nine months ended September 30, 2006 were due primarily to gains from derivatives (refer to “INVESTMENTS - Risk Management and Market-Sensitive Instruments” for a discussion of our use of derivatives) partially offset by losses on the sale of debt securities from rebalancing our investment portfolio. Net realized capital gains for the three months ended September 30, 2005 were due to gains on the sale of debt securities from rebalancing our investment portfolio and interest payments received related to investments previously written-down, partially offset by losses from futures contracts used for correlating the maturities of invested assets with the payment of expected liabilities. Net realized capital gains for the nine months ended September 30, 2005 were due to gains on the sale of debt securities from rebalancing our investment portfolio and interest payments received related to investments previously written-down, as well as real estate gains.

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Membership Health Care’s membership at September 30, 2006 and 2005 was as follows:

(Thousands) Risk ASC Total Risk ASC TotalMedical: Commercial 5,085 10,037 15,122 5,014 9,401 14,415 Medicare Advantage 124 - 124 102 - 102 Medicare Health Support Program - 18 18 - 20 20 Medicaid 7 112 119 - 113 113 Total Medical Membership 5,216 10,167 15,383 5,116 9,534 14,650

Consumer-Directed Health Plans (1) 644 433

Dental 5,022 8,374 13,396 5,038 7,993 13,031

Pharmacy: Commercial 9,138 8,791 Medicare PDP (stand-alone) 319 - Medicare Advantage PDP 115 - Total Pharmacy Benefit Management Services 9,572 8,791 Mail Order (2) 630 546 Total Pharmacy 10,202 9,337

2006 2005

(1) Represents members in consumer-directed health plans included in Commercial medical membership above. (2) Represents members who purchased medications through our mail order pharmacy operations during the third quarter 2006 and 2005,

respectively. Total medical and dental membership as of September 30, 2006 increased by 733 thousand and 365 thousand members, respectively, compared to September 30, 2005. The percentage of Risk and ASC medical membership was approximately 34% and 66% at September 30, 2006 and 35% and 65% at September 30, 2005, respectively. GROUP INSURANCE Group Insurance includes primarily group life insurance products offered on a Risk basis, including basic term group life insurance, group universal life, supplemental or voluntary programs and accidental death and dismemberment coverage. Group Insurance also includes group disability products offered on both a Risk and an ASC basis which consist primarily of short-term and long-term disability insurance (and products which combine both), as well as long-term care products, which provide benefits offered to cover the cost of care in private home settings, adult day care, assisted living or nursing facilities, primarily on a Risk basis. Additionally, as a result of the Broadspire Disability acquisition on March 31, 2006, Group Insurance includes absence management services, including short-term and long-term disability administration and leave management, to employers. In the fourth quarter of 2006, we decided to exit the long-term care insurance market and no longer solicit or accept new long-term care customers. Over the next two to three years, we will work with our customers on an orderly transition of this business to other carriers. This decision will not have a material impact on our financial condition or results of operations.

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Operating Summary for the Three and Nine Months Ended September 30, 2006 and 2005:

(Millions) 2006 2005 2006 2005 Premiums: Life 297.5$ 322.9$ 956.0$ 985.1$ Disability 99.2 91.0 298.1 281.1 Long-term care 25.9 24.2 76.9 70.5 Total premiums 422.6 438.1 1,331.0 1,336.7 Fees and other revenue 26.9 7.8 60.1 24.3 Net investment income 69.5 78.8 219.8 216.2 Net realized capital gains 7.8 5.1 4.2 10.1 Total revenue 526.8 529.8 1,615.1 1,587.3 Current and future benefits 391.4 418.4 1,243.8 1,264.8 Operating expenses: Selling expenses 19.7 20.6 64.1 60.5 General and administrative expenses (1) 59.6 41.7 168.8 125.7 Total operating expenses 79.3 62.3 232.9 186.2 Amortization of other acquired intangible assets 1.8 - 3.5 - Total benefits and expenses 472.5 480.7 1,480.2 1,451.0 Income before income taxes 54.3 49.1 134.9 136.3 Income taxes 14.6 13.5 35.6 37.0 Net income 39.7$ 35.6$ 99.3$ 99.3$

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) Includes salaries and related benefit expenses of $38.9 million and $95.4 million for the three and nine months ended September 30, 2006, respectively, and $25.7 million and $80.6 million, respectively, for the corresponding periods in 2005.

The table presented below reconciles operating earnings to net income reported in accordance with GAAP for the three and nine months ended September 30, 2006 and 2005:

(Millions, after tax) 2006 2005 2006 2005 Net income 39.7$ 35.6$ 99.3$ 99.3$ Other items included in net income: Net realized capital gains (5.1) (3.3) (2.7) (6.6) Acquisition-related software charge (1) - - 6.2 - Operating earnings 34.6$ 32.3$ 102.8$ 92.7$

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) As a result of the acquisition of Broadspire Disability in the first quarter of 2006, we acquired certain software which eliminated the

need for similar software we had been developing internally. As a result, we ceased our own software development and impaired amounts previously capitalized, resulting in a $6.2 million ($8.3 million pretax) charge to net income, reflected in general and administrative expenses for the nine months ended September 30, 2006. This charge does not reflect the underlying business performance of Group Insurance and therefore, we have excluded it from operating earnings for the nine months ended September 30, 2006.

The increase in operating earnings for the three and nine months ended September 30, 2006 when compared to the corresponding periods in 2005, reflects higher fees and other revenue and a lower benefit cost ratio partially offset by higher general and administrative expenses. The operating earnings for the three and nine months ended September 30, 2006 also reflect increases in fees and other revenue as well as general and administrative expenses related to the March 2006 acquisition of Broadspire Disability. Our Group Insurance benefit cost ratio was 92.6% and 93.4% for the three and nine months ended September 30, 2006, respectively, compared to 95.5% and 94.6% for the corresponding periods in 2005. The decrease in our benefit cost ratio for the third quarter of 2006 was primarily due to a decrease in the life benefit cost ratio due to favorable experience. The decrease in our benefit cost ratio for the nine months ended September 30, 2006 was primarily due to a decrease in the disability benefit cost ratio due to favorable experience.

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Net realized capital gains for the three months ended September 30, 2006 were due primarily to real estate gains and gains on the sale of debt securities from rebalancing our investment portfolio. Net realized capital gains for the nine months ended September 30, 2006 were due primarily to real estate gains. Net realized capital gains for the three months ended September 30, 2005 were due primarily to gains on the sale of debt securities from rebalancing our investment portfolio, interest payments received related to investments previously written-down and real estate gains partially offset by losses from futures contracts used for correlating the maturities of invested assets with the payment of expected liabilities. Net realized capital gains for the nine months ended September 30, 2005 were due primarily to gains on the sale of debt securities from rebalancing our investment portfolio, interest payments received related to investments previously written-down and real estate gains. Membership Group Insurance’s membership at September 30, 2006 and 2005 was as follows: (Thousands) 2006 2005 Life 10,205 10,872 Disability (1) 4,882 2,568 Long-term care 222 235 Total 15,309 13,675

(1) Includes approximately 2.1 million members acquired in the Broadspire Disability acquisition on March 31, 2006. Total Group Insurance membership as of September 30, 2006 increased by 1.6 million members when compared to September 30, 2005. New membership in Group Insurance was 3.9 million for the twelve months ended September 30, 2006, and lapses and in-force membership reductions were 2.3 million for the same period, primarily reflecting new membership from the Broadspire Disability acquisition offset by lapses in several large life cases. LARGE CASE PENSIONS

Large Case Pensions manages a variety of retirement products (including pension and annuity products) primarily for tax qualified pension plans. These products provide a variety of funding and benefit payment distribution options and other services. The Large Case Pensions segment includes certain discontinued products.

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Operating Summary for the Three and Nine Months Ended September 30, 2006 and 2005:

(Millions) 2006 2005 2006 2005 Premiums 49.9$ 56.1$ 151.5$ 157.7$ Net investment income 124.1 124.2 383.0 393.3 Other revenue 2.9 3.0 8.6 8.5 Net realized capital gains 4.2 1.5 15.4 .8 Total revenue 181.1 184.8 558.5 560.3 Current and future benefits (1) 162.7 163.4 489.8 513.6 General and administrative expenses (2) 3.4 5.1 12.6 13.3 Reduction of reserve for anticipated future losses on discontinued products - - (115.4) (66.7) Total benefits and expenses 166.1 168.5 387.0 460.2 Income before income taxes 15.0 16.3 171.5 100.1 Income taxes (1) 1.7 5.7 56.5 35.0 Net income 13.3$ 10.6$ 115.0$ 65.1$

Assets under management: (3)

Fully guaranteed discontinued products 4,409.8$ 4,485.7$ Experience-rated 3,947.1 4,390.9 Non-guaranteed (4) 14,358.2 11,536.4 Total assets under management 22,715.1$ 20,413.0$

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) In the third quarter of 2006, we reclassified tax credits primarily from our affordable housing partnership investments which were previously recorded in deferred tax liabilities, to a component of the reserve for anticipated future losses on discontinued products.

(2) Includes salaries and related benefit expenses of $3.7 million and $10.3 million for the three and nine months ended September 30, 2006, respectively, and $3.7 million and $11.0 million, respectively, for the corresponding periods in 2005.

(3) Excludes net unrealized capital gains of $220.5 million and $424.6 million at September 30, 2006 and 2005, respectively. (4) The increase in non-guaranteed assets under management in 2006 was due primarily to additional deposits and investment

appreciation.

The table presented below reconciles operating earnings to net income reported in accordance with GAAP for the three and nine months ended September 30, 2006 and 2005:

(Millions) 2006 2005 2006 2005 Net income 13.3$ 10.6$ 115.0$ 65.1$ Other items included in net income: Net realized capital gains (2.7) (1.0) (10.0) (.5) Reduction of reserve for anticipated future losses on discontinued products (1) - - (75.0) (43.4) Operating earnings 10.6$ 9.6$ 30.0$ 21.2$

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) In 1993, we discontinued the sale of our fully guaranteed large case pension products and established a reserve for anticipated future losses on these products, which we review quarterly. Changes in this reserve are recognized when deemed appropriate. In the nine months ended September 30, 2006 and 2005, we reduced the reserve for anticipated future losses on discontinued products by $75.0 million ($115.4 million pretax) and $43.4 million ($66.7 million pretax), respectively. We believe excluding any changes to the reserve for anticipated future losses on discontinued products provides more useful information as to our continuing products and is consistent with the treatment of the results of operations of these discontinued products, which are credited/charged to the reserve and do not affect our results of operations.

The increase in operating earnings for the nine months ended September 30, 2006 compared to the corresponding period in 2005 reflects an increase in net investment income in continuing products primarily due to higher income from the receipt of mortgage loan prepayment fees, equity participation income and other investments. The reductions of the reserve for anticipated future losses on discontinued products for the nine months ended September 30, 2006 and 2005 were primarily due to favorable investment performance and favorable mortality and retirement experience compared to assumptions underlying the reserve calculation.

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General account assets supporting experience-rated products (where the contract holder, not us, assumes investment and other risks subject to, among other things, certain minimum guarantees) may be subject to contract holder or participant withdrawal. Experience-rated contract holder and participant withdrawals for the three and nine months ended September 30, 2006 and 2005 were as follows:

(Millions) 2006 2005 2006 2005 Scheduled contract maturities and benefit payments (1) 87.6$ 88.7$ 261.4$ 275.8$ Contract holder withdrawals other than scheduled contract maturities and benefit payments 177.1 27.3 198.6 42.3 Participant-directed withdrawals 4.5 4.9 15.6 14.0

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) Includes payments made upon contract maturity and other amounts distributed in accordance with contract schedules. Discontinued Products We discontinued the sale of our fully guaranteed large case pension products (single-premium annuities (“SPAs”) and guaranteed investment contracts) in 1993. We established a reserve for anticipated future losses on these products based on the present value of the difference between the expected cash flows from the assets supporting these products and the cash flows expected to be required to meet the product obligations. Results of operations of discontinued products, including net realized capital gains (losses), are credited (charged) to the reserve for anticipated future losses. Our results of operations would be adversely affected to the extent that future losses on the products are greater than anticipated and favorably affected to the extent future losses are less than anticipated. The factors contributing to changes in the reserve for anticipated future losses are: operating income or loss, realized capital gains or losses and mortality gains or losses. Operating income or loss is equal to revenue less expenses. Realized capital gains or losses reflect the excess (deficit) of sales price over (below) the carrying value of assets sold and any other-than-temporary impairments. Mortality gains or losses reflect the mortality and retirement experience related to SPAs. A mortality gain (loss) occurs when an annuitant or a beneficiary dies sooner (later) than expected. A retirement gain (loss) occurs when an annuitant retires later (earlier) than expected. The results of discontinued products for the three and nine months ended September 30, 2006 and 2005 were as follows:

(Millions) 2006 2005 2006 2005 Interest deficit (1) (3.6)$ (8.4)$ (8.3)$ (6.6)$ Net realized capital gains 5.2 8.0 18.5 8.0 Interest earned on receivable from continuing products 4.3 4.8 14.3 15.0 Other, net 1.5 1.7 8.7 9.8 Results of discontinued products, after tax 7.4$ 6.1$ 33.2$ 26.2$

Results of discontinued products, pretax 8.7$ 7.2$ 42.8$ 33.3$

Net realized capital gains from bonds, after tax (included above) 5.5$ 5.3$ 4.2$ 5.2$

Three Months Ended Nine Months EndedSeptember 30, September 30,

(1) The interest deficit is the difference between earnings on invested assets and interest credited to contract holders. The interest deficit for the three months ended September 30, 2006 decreased compared to the corresponding period in 2005 primarily due to higher private equity partnership income.

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Net realized capital gains for the three months ended September 30, 2006 were due primarily to gains on the sale of debt securities from rebalancing our investment portfolio and gains on futures contracts partially offset by losses on the write-down of other investments. Net realized capital gains for the nine months ended September 30, 2006 were due primarily to real estate gains, gains on the sale of debt securities from rebalancing our investment portfolio and the sale of equity securities partially offset by losses on the write-down of other investments. For the three and nine months ended September 30, 2005, net realized capital gains were due primarily to gains on the sale of debt and equity securities partially offset by losses on futures contracts. At the time of discontinuance, a receivable from Large Case Pensions’ continuing products equivalent to the net present value of the anticipated cash flow shortfalls was established for the discontinued products. Interest on the receivable is accrued at the discount rate that was used to calculate the reserve. Total assets supporting discontinued products and the reserve include a receivable from continuing products of $311 million at September 30, 2006 and $372 million at December 31, 2005, net of related deferred taxes payable. These amounts were eliminated in consolidation. The reserve for anticipated future losses on discontinued products represents the present value (at the risk-free rate at the time of discontinuance, consistent with the duration of the liabilities) of the difference between the expected cash flows from the assets supporting discontinued products and the cash flows expected to be required to meet the obligations of the outstanding contracts. Calculation of the reserve for anticipated future losses requires projection of both the amount and the timing of cash flows over approximately the next 30 years, including consideration of, among other things, future investment results, participant withdrawal and mortality rates, as well as the cost of asset management and customer service. Since 1993, there have been no significant changes to the assumptions underlying the calculation of the reserve related to the projection of the amount and timing of cash flows, except as noted below. The projection of future investment results considers assumptions for interest rates, bond discount rates and performance of mortgage loans and real estate. Mortgage loan cash flow assumptions represent management’s best estimate of current and future levels of rent growth, vacancy and expenses based upon market conditions at each reporting date. The performance of real estate assets has been consistently estimated using the most recent forecasts available. Since 1997, a bond default assumption has been included to reflect historical default experience, since the bond portfolio increased as a percentage of the overall investment portfolio and reflected more bond credit risk, concurrent with the declines in the commercial mortgage loan and real estate portfolios. The previous years’ actual participant withdrawal experience is used for the current-year assumption. Prior to 1995, we used the 1983 Group Annuitant Mortality table published by the Society of Actuaries (the “Society”). In 1995, the Society published the 1994 Uninsured Pensioner’s Mortality table, which we have used since then. Our assumptions about the cost of asset management and customer service reflect actual investment and general expenses allocated over invested assets. The activity in the reserve for anticipated future losses on discontinued products for the nine months ended September 30, 2006 was as follows (pretax): (Millions)Reserve for anticipated future losses on discontinued products at December 31, 2005 1,052.2$ Operating income 9.2 Net realized capital gains 28.4 Mortality and other 5.2 Tax benefits (1) 41.6 Reserve reduction (115.4) Reserve for anticipated future losses on discontinued products at September 30, 2006 1,021.2$

(1) Amount represents tax credits primarily from tax advantaged investments which were reclassified within the liabilities supporting discontinued products from deferred tax liabilities.

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Management reviews the adequacy of the discontinued products reserve quarterly and, as a result, $115 million ($75 million after tax) and $67 million ($43 million after tax) of the reserve was released in the second quarter of 2006 and 2005, respectively, primarily due to favorable investment performance and favorable mortality and retirement experience compared to assumptions underlying the reserve calculation. The current reserve reflects management’s best estimate of anticipated future losses.

The discontinued products investment portfolio at September 30, 2006 and December 31, 2005 was as follows:

(Millions) Amount Percent Amount PercenDebt securities available for sale 2,897.0$ 63.4 % 3,032.3$ 64.3 %Loaned securities 230.0 5.0 289.3 6.1 Total debt securities 3,127.0 68.4 3,321.6 70.4 Mortgage loans 641.8 14.1 644.9 13.7 Investment real estate 81.0 1.8 103.6 2.2 Equity securities available for sale 56.4 1.2 43.1 .9 Other (1) 662.8 14.5 603.3 12.8 Total 4,569.0$ 100.0 % 4,716.5$ 100.0 %

September 30, 2006 December 31, 2005t

(1) Amount includes restricted debt securities on deposit as required by regulatory authorities of $21.8 million at September 30, 2006 and

$21.3 million at December 31, 2005, included in long-term investments on the Consolidated Balance Sheets. Distributions on discontinued products for the three and nine months ended September 30, 2006 and 2005 were as follows:

(Millions) 2006 2005 2006 2005 Scheduled contract maturities, settlements and benefit payments 119.5$ 121.7$ 359.8$ 368.8$ Participant-directed withdrawals .1 - .3 .1

Three Months Ended Nine Months EndedSeptember 30, September 30,

Cash required to fund these distributions was provided by earnings and scheduled payments on, and sales of, invested assets. CORPORATE INTEREST Corporate interest expense represents interest incurred on our debt and is not recorded in our business segments. After tax interest expense was $26 million and $70 million for the three and nine months ended September 30, 2006, respectively, compared to $21 million and $59 million, respectively, for the corresponding periods in 2005. The increase in interest expense for the three and nine months ended September 30, 2006, over the corresponding periods in 2005, was related to higher overall average long-term debt levels as a result of our issuance of $2.0 billion in senior notes in June 2006 and the sale of interest rate swap agreements in 2005. INVESTMENTS Investments disclosed in this section relate to our total portfolio (including assets supporting discontinued products and experience-rated products).

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Total investments at September 30, 2006 and December 31, 2005 were as follows:

(Millions) Current Long-term Total Current Long-term TotalDebt securities available for sale: Available for use in current operations 13,127.5$ -$ 13,127.5$ 13,216.9$ -$ 13,216.9$ Loaned securities 895.8 - 895.8 1,115.7 - 1,115.7 On deposit, as required by regulatory authorities - 501.6 501.6 - 522.4 522.4 Debt securities available for sale 14,023.3 501.6 14,524.9 14,332.6 522.4 14,855.0 Equity securities available for sale 31.8 40.3 72.1 34.5 26.7 61.2 Short-term investments 104.0 - 104.0 114.8 - 114.8 Mortgage loans 230.6 1,381.2 1,611.8 86.7 1,460.8 1,547.5 Investment real estate - 188.1 188.1 7.4 207.2 214.6 Other investments 3.5 1,139.7 1,143.2 2.7 1,113.0 1,115.7 Total investments 14,393.2$ 3,250.9$ 17,644.1$ 14,578.7$ 3,330.1$ 17,908.8$

September 30, 2006 December 31, 2005

Debt and Equity Securities Debt securities represented 82% and 83% at September 30, 2006 and December 31, 2005, respectively, of our total invested assets and supported the following types of products:

September 30, December 31, (Millions) 2006 2005 Supporting discontinued products 3,148.8$ 3,342.9$ Supporting experience-rated products 1,674.8 1,920.8 Supporting remaining products 9,701.3 9,591.3 Total debt securities (1) 14,524.9$ 14,855.0$

(1)Total debt securities include “Below Investment Grade” Securities of $849 million at September 30, 2006, and $967 million at December 31, 2005, of which 23% at September 30, 2006 and 25% at December 31, 2005 supported discontinued and experience-rated products.

Debt securities reflect net unrealized capital gains of $293 million (comprised of gross unrealized capital gains of $432 million and gross unrealized capital losses of $139 million) at September 30, 2006 compared with net unrealized capital gains of $494 million (comprised of gross unrealized capital gains of $623 million and gross unrealized capital losses of $129 million) at December 31, 2005. Of the net unrealized capital gains at September 30, 2006, $159 million relate to assets supporting discontinued products and $55 million relate to experience-rated products. Of the net unrealized capital gains at December 31, 2005, $250 million relate to assets supporting discontinued products and $103 million relate to experience-rated products. Equity securities reflect gross unrealized capital gains of $4 million at September 30, 2006 compared with gross unrealized capital gains of $10 million at December 31, 2005. If management believes a decline in the value of a particular investment is temporary, the decline is recorded as an unrealized loss in Shareholders’ Equity. If the decline is “other-than-temporary”, the carrying value of the investment is written down and a realized capital loss is recorded in the Consolidated Statement of Income consistent with the guidance of FAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, FASB Staff Position FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments, and the Securities and Exchange Commission Staff Accounting Bulletin No. 59, Accounting for Noncurrent Marketable & Equities Securities. Our impairment analysis is discussed in more detail in “MD&A – INVESTMENTS” in our 2005 Annual Report. At September 30, 2006 and December 31, 2005, we had no individually material unrealized losses on debt or equity securities which could have a material impact on our results of operations.

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Capital Gains and Losses For the three and nine months ended September 30, 2006, net realized capital gains were $16 million ($10 million after tax) and $22 million ($14 million after tax), respectively. For the three and nine months ended September 30, 2005, net realized capital gains were $9 million ($6 million after tax) and $19 million ($12 million after tax), respectively. There were no significant investment write downs from other-than-temporary impairments during 2006 or 2005. We had no individually material realized losses on debt or equity securities that impacted our results of operations during the three and nine months ended September 30, 2006 and 2005. Mortgage Loans Our mortgage loan investments, net of impairment reserves, supported the following types of products at September 30, 2006 and December 31, 2005:

September 30, December 31, (Millions) 2006 2005 Supporting discontinued products 641.8$ 644.9$ Supporting experience-rated products 319.1 320.8 Supporting remaining products 650.9 581.8 Total mortgage loans 1,611.8$ 1,547.5$

The mortgage loan portfolio balance represented 9% of our total invested assets at both September 30, 2006 and December 31, 2005. There were no material problem, restructured or potential problem loans included in mortgage loans at September 30, 2006 or December 31, 2005. There were no specific impairment reserves on these loans at September 30, 2006 or December 31, 2005. Risk Management and Market-Sensitive Instruments We manage interest rate risk by seeking to maintain a tight match between the durations of our assets and liabilities where appropriate while credit risk is managed by seeking to maintain high average quality ratings and diversified sector exposure within the debt securities portfolio. In connection with our investment and risk management objectives, we also use financial instruments whose market value is at least partially determined by, among other things, levels of or changes in interest rates (short-term or long-term), duration, prepayment rates, equity markets or credit ratings/spreads. Our use of these derivatives is generally limited to hedging purposes and has principally consisted of using interest rate swap agreements, warrants, forward contracts and futures contracts. These instruments, viewed separately, subject us to varying degrees of interest rate, equity price and credit risk. However, when used for hedging, we expect these instruments to reduce overall risk. We regularly evaluate the risk of market-sensitive instruments by examining, among other things, levels of or changes in interest rates (short-term or long-term), duration, prepayment rates, equity markets or credit ratings/spreads. We also regularly evaluate the appropriateness of investments relative to our management-approved investment guidelines (and operate within those guidelines) and the business objective of the portfolios. The risks associated with investments supporting experience-rated pension and annuity products in the Large Case Pensions business are assumed by those contract holders and not by us (subject to, among other things, certain minimum guarantees). Anticipated future losses associated with investments supporting discontinued fully guaranteed large case pension products are provided for in the reserve for anticipated future losses (refer to “LARGE CASE PENSIONS – Discontinued Products”). Management also reviews, on a quarterly basis, the impact of hypothetical net losses on our consolidated near-term financial position, results of operations and cash flows assuming certain reasonably possible changes in market rates and prices were to occur. Based on our overall exposure to interest rate risk and equity price risk, we believe that these changes in market rates and prices would not materially affect our consolidated near-term financial position, results of operations or cash flows as of September 30, 2006. Refer to our 2005 Annual Report for a more complete discussion of “Risk Management and Market-Sensitive Instruments.”

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LIQUIDITY AND CAPITAL RESOURCES Cash Flows Generally, we meet our operating requirements by maintaining appropriate levels of liquidity in our investment portfolio and using overall cash flows from premiums, deposits and income received on investments. We monitor the duration of our debt securities portfolio (which is highly marketable) and mortgage loans, and execute purchases and sales of these investments with the objective of having adequate funds available to satisfy our maturing liabilities. Overall cash flows are used primarily for claim and benefit payments, contract withdrawals and operating expenses. The following table for the nine months ended September 30, 2006 and 2005 details the operating cash flows of Health Care and Group Insurance separately from Large Case Pensions, as changes in Large Case Pensions’ insurance reserves are funded from the sale of investments, which impact cash flows from investing activities (and not operating cash flows). (Millions) 2006 2005Health Care and Group Insurance (1) 1,378.3$ 1,283.5$ Large Case Pensions (235.0) (174.3) Discontinued Operations 49.7 - Net cash provided by operating activities 1,193.0$ 1,109.2$

(1) Includes corporate interest. Cash flows provided by operating activities for Health Care and Group Insurance were approximately $1.4 billion and $1.3 billion for the nine months ended September 30, 2006 and 2005, respectively. Included in these amounts were payments of approximately $245 million pretax in voluntary pension contributions in each fiscal period. The cash flows from operating activities for the nine months ended September 30, 2006 also reflect the receipt of the remaining $50 million refund resulting from the completion of certain Internal Revenue Service audits associated with businesses previously sold by our former parent company (refer to Note 16 of Condensed Notes to Consolidated Financial Statements for additional information). The cash flows provided by operating activities for the nine months ended September 30, 2005 also include payments of approximately $150 million pretax related to the 2003 physician class action settlement. Refer to the “Consolidated Statements of Cash Flows” for additional information. Financings, Financing Capacity and Capitalization In June 2006, we issued $2.0 billion of senior notes, comprised of $450 million of 5.75% senior notes due 2011, $750 million of 6.0% senior notes due 2016 and $800 million of 6.625% senior notes due 2036. The proceeds from these senior notes were used to redeem the entire $700 million aggregate principal amount of our 8.5% senior notes due 2041 and to repay approximately $400 million of commercial paper borrowings, outstanding since the March 1, 2006 maturity of the entire $450 million aggregate principal amount of our 7.375% senior notes. The remainder of the net proceeds raised were used for general corporate purposes, including share repurchases. The maximum amount of commercial paper outstanding during the nine months ended September 30, 2006 was approximately $746 million. We use short-term borrowings from time to time to address timing differences between cash receipts and disbursements. Our committed short-term borrowing capacity consists of a $1 billion revolving credit facility which terminates in January 2011 and a one-year bridge loan facility for certain of our subsidiaries with a borrowing capacity of up to $45 million. The $1 billion revolving credit facility also provides for the issuance of letters of credit at our request, up to $150 million, which count as usage of the available commitments under the facility. At September 30, 2006, there were no borrowings outstanding under our commercial paper program, and $1.5 million was outstanding under the one-year subsidiary bridge loan facility. The $1 billion revolving credit facility permits the aggregate commitments under the facility to be expanded to a maximum of $1.35 billion upon our agreement with one or more financial institutions. Our total debt to capital ratio (total debt divided by total debt plus shareholders’ equity), was 20% at September 30, 2006. Refer to Note 10 of Condensed Notes to Consolidated Financial Statements for additional information.

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Common Stock Transactions On January 27, 2006, the Board declared a two-for-one stock split of our common stock, which was effected in the form of a 100% common stock dividend. All shareholders of record at the close of business on February 7, 2006 (the “Shareholders of Record”) received one additional share of common stock for each share held on that date. The additional shares of common stock were distributed to the Shareholders of Record in the form of a stock dividend on February 17, 2006. All share and per share amounts in this MD&A have been adjusted to reflect the stock split for all periods. In connection with the stock split, the Board approved an amendment to our Articles of Incorporation. This amendment increased the number of our authorized common shares to 2.9 billion shares on February 17, 2006. On February 10, 2006, approximately 5.0 million stock appreciation rights (“SARs”) as well as approximately .6 million restricted stock units (“RSUs”) were granted to certain employees. The SARs will be settled in stock, net of taxes, based on the appreciation of our stock price over $50.21 per share, the closing price of our common stock on February 10, 2006. The SARs will become 100% vested three years from the grant date, with one-third of the SARs vesting each year, although 1.0 million of the SARs will vest over a one-year period. For each RSU granted, employees receive one share of common stock, net of taxes, at the end of the vesting period. The RSUs will become 100% vested three years from the grant date. Refer to Note 9 of Condensed Notes to Consolidated Financial Statements for additional information on our Stock-Based Compensation Plans. Under our share repurchase programs, approximately 52 million shares were repurchased during the nine months ended September 30, 2006. As of September 30, 2006, the capacity remaining under our share repurchase authorizations was approximately $937 million. Refer to Note 11 of Condensed Notes to Consolidated Financial Statements for more information. On September 29, 2006, our Board declared an annual cash dividend of $.04 per common share to shareholders of record on the close of business on November 15, 2006. The dividend will be paid on November 30, 2006. Our Board reviews our common stock dividend annually. Among the factors considered by the Board in determining the amount of each dividend are our results of operations and the capital requirements, growth and other characteristics of our businesses. Ratings As of October 25, 2006 the credit ratings of Aetna Inc. and Aetna Life Insurance Company (“ALIC”) from the respective Nationally Recognized Statistical Rating Organizations (“Rating Agencies”) were as follows:

Moody's Investors StandardA.M. Best Fitch Service & Poor's

Aetna Inc. (senior debt) (1) bbb+ A- A3 A-

Aetna Inc. (commercial paper) (1) AMB-2 F2 P-2 A-2

ALIC (financial strength) (1) A AA- Aa3 A+

(1) The stated outlook from all Rating Agencies for the senior debt and financial strength ratings of Aetna Inc. and ALIC, respectively, is stable.

CRITICAL ACCOUNTING ESTIMATES We prepare our consolidated financial statements in accordance with GAAP. The application of GAAP requires management to make estimates and assumptions that affect our consolidated financial statements and related notes. We use information available to us at the time the estimates are made; however, as described below, these estimates could change materially if different information or assumptions were used. Also, these estimates may not ultimately reflect the actual amounts of the final transactions that occur. The following provides a summary of our health care costs payable and other insurance liabilities estimates. For a detailed description of all of our critical accounting estimates, refer to the “CRITICAL ACCOUNTING ESTIMATES” portion of our 2005 Annual Report.

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Health Care Costs Payable Health care costs payable reflects estimates of the ultimate cost of claims that have been incurred but not yet reported and of those which have been reported but not yet paid (collectively “IBNR”). At September 30, 2006 and December 31, 2005, our IBNR reserves represented approximately 80% and 79%, respectively, of total health care costs payable. The remaining amount is primarily comprised of pharmacy and capitation payables and accruals for state assessments. We develop our IBNR estimates using actuarial principles and assumptions that consider numerous factors. Of those factors, we consider the analysis of historical and projected claim payment patterns (including claims submission and processing patterns) and the assumed health care cost trend rate to be the most critical assumptions. In developing our estimate of health care costs payable, we consistently apply these actuarial principles and assumptions each period, with consideration to the variability of related factors.

We analyze historical claim payment patterns by comparing claim incurred dates (i.e., the date services were provided) to claim payment dates to estimate “completion factors.” We estimate completion factors by aggregating claim data based on the month of service and month of claim payment and estimating the percentage of claims incurred for a given month that are complete by each month thereafter. For any given month, substantially all claims are paid within six months of the date of service, but it can take up to 48 months or longer before all of the claims are completely resolved and paid. These historically derived completion factors are then applied to claims paid through the financial statement date to estimate the ultimate claim cost for a given month’s incurred claim activity. The difference between the estimated ultimate claim cost and the claims paid through the financial statement date represents our estimate of claims remaining to be paid as of the financial statement date and is included in our health care costs payable.

We use completion factors predominantly to estimate reserves for claims with claim incurred dates greater than three months prior to the financial statement date. The completion factors we use reflect judgments and possible adjustments for such data as claim inventory levels, claim submission and processing patterns and, to a lesser extent, other factors such as changes in health care cost trend rates, changes in membership and product mix. If claims are submitted or processed on a faster (slower) pace than prior periods, the actual claims may be more (less) complete than originally estimated using our completion factors, which may result in reserves that are higher (lower) than required.

Because claims incurred within three months prior to the financial statement date have less activity (i.e., a large portion of health care claims are not submitted to us and/or processed until after the end of the quarter in which services are rendered by providers to our members), estimates of the ultimate claims incurred for these months are not based primarily on the historically derived completion factors. Rather, the estimates for these months also reflect increased emphasis on the assumed health care cost trend rate (the rate of increase in per member health care costs), which may be influenced by our historical and projected claim submission and processing times as well as seasonal patterns and changes in membership and product mix.

Our health care cost trend rate is affected by increases in per member utilization of medical services as well as increases in the per unit cost of such services. Many factors influence the health care cost trend rate, including our ability to manage health care costs through underwriting criteria, product design, negotiation of favorable provider contracts and medical management programs. The aging of the population and other demographic characteristics, advances in medical technology and other factors continue to contribute to rising per member utilization and per unit costs. Changes in health care practices, inflation, new technologies, increases in the cost of prescription drugs, direct-to-consumer marketing by pharmaceutical companies, clusters of high cost cases, changes in the regulatory environment, health care provider or member fraud and numerous other factors also contribute to the cost of health care and our health care cost trend rate.

For each reporting period, an extensive degree of judgment is used in the process of estimating our health care costs payable, and as a result, considerable variability and uncertainty is inherent in such estimates, and the adequacy of such estimates is highly sensitive to changes in assumed completion factors and the assumed health care cost trend rate. For each reporting period we recognize our best estimate 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, 2006; however, actual claim payments may differ from our estimates. A worsening (or improvement) of our health care cost trend rates or changes in completion factors from those that were assumed in estimating health care costs payable at September 30, 2006 would cause these estimates to change in the near term, and such a change could be material.

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Each quarter, we re-examine previously established health care costs payable estimates based on actual claim payments for prior periods and other changes in facts and circumstances. Given the extensive degree of judgment in this estimate, it is possible that our estimates of health care costs payable could develop either favorably (i.e., our actual health care costs for the period were less than we estimated) or unfavorably. We include the impact of changes in estimates in earnings when they are identified. The changes in the estimate of health care costs payable may relate to a prior fiscal quarter, prior fiscal year or earlier periods. The results of these re-examinations are also considered when we determine our current year liabilities. In the three months ended September 30, 2006, we recorded favorable development of prior period health care cost estimates of approximately $45 million pretax (refer to MD&A – HEALTH CARE for additional information).

During the three months ended September 30, 2006, we observed that our health care cost trend rates for claims with dates of service three months or less before the financial statement date were slightly lower than previously estimated, which contributed to the favorable development of prior period health care cost estimates. Specifically, after considering the claims paid in 2006 with dates of service prior to June 30, 2006, we observed health care cost trend rates that were approximately 1.4% lower than previously estimated for claims associated with combined Commercial Risk and Medicare IBNR (approximately 1% when considering all components of health care costs). The lower than anticipated health care cost trend rates we observed during the three months ended September 30, 2006 for claims incurred prior to June 30, 2006 were due to moderating outpatient, ancillary and physician service trends. Historical health care cost trend rates are not necessarily representative of current trends. Therefore, we consider historical trend rates together with our knowledge of recent events that may impact current trends when developing our estimates of current trend rates. When establishing our reserves at September 30, 2006, we decreased our assumed health care cost trend rates to account for the lower than anticipated health care cost trend rates observed during the three months ended September 30, 2006. Based on our historical claim experience, it is reasonably possible that our estimated health care cost trend rates may vary by plus or minus 4.0 percentage points from actual.

After considering the claims paid in the three months ended September 30, 2006 with dates of service prior to June 30, 2006, we observed weighted average completion factors that were consistent with those previously estimated. When establishing our reserves at September 30, 2006, the assumed weighted average completion factors were consistent with those used at June 30, 2006. Based on our historical claim experience, it is reasonably possible that our estimated weighted average completion factors may vary by plus or minus .75 percentage points from actual.

The following table illustrates the sensitivity of our health care costs payable at September 30, 2006 (in millions) to certain reasonably possible changes to the estimated weighted average completion factors and health care cost trend rates. However, it is possible that the actual completion factors and health care cost trend rates will develop differently from our historical patterns and therefore could be outside of the ranges illustrated below.

(Decrease) Increase (Decrease) Increase in (Decrease) Increase (Decrease) Increase in in Factor Health Care Costs Payable in Factor Health Care Costs Payable

(4%) (109.9)$ (.75%) 54.9$ (3%) (82.4)

(.5%) 36.5 (2%) (55.0) (.25%) 18.2 (1%) (27.5)

.25% (18.2) 1% 27.5 .5% (36.4) 2% 55.0

.75% (54.5) 3% 82.4 4% 109.9

Completion Factors (1) Health Care Cost Trend Rates (2)

(1) Reflects estimated impact of a (decrease) increase in weighted average completion factors prior to the most recent three months. An increase in the completion factor results in a decrease in the remaining estimated reserves for claims. (2) Reflects estimated impact of a (decrease) increase in health care cost trend rates for the most recent three months.

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Health care costs payable as of September 30, 2006 and December 31, 2005 consisted of the following:

(Millions) 2006 2005 Commercial Risk 1,823.6$ 1,737.3$ Medicare 129.6 79.5 Medicaid 1.3 .2 Total health care costs payable 1,954.5$ 1,817.0$ Premium Deficiency Reserves In cases where we project future health care costs will exceed existing reserves plus anticipated future premiums, we establish premium deficiency reserves for the amount of the expected loss in excess of expected future premiums. Anticipated investment income is considered in the calculation of expected losses for certain contracts. Any such reserves established would normally cover expected losses until the next policy renewal dates for the related policies. We did not have any material premium deficiency reserves at September 30, 2006.

Other Insurance Liabilities We establish insurance liabilities other than health care costs payable for benefit claims related to our Group Insurance segment. We refer to these liabilities as other insurance liabilities. These liabilities relate to our life, disability and long-term care products.

Life and Disability The liabilities for our life and disability products reflect benefit claims that have been reported but not yet paid, estimates of claims that have been incurred but not yet reported and future policy benefits earned under insurance contracts. These reserves and the related benefit expenses are developed using actuarial principles and assumptions that consider, among other things, discount, recovery and mortality rates (each discussed below). Completion factors are also evaluated when estimating our reserves for claims incurred but not yet reported for life products. We also consider the benefit payments from the U.S. Social Security Administration for which our disability members may be eligible and which may offset our liability for disability claims (known as the Social Security offset). Each period, we estimate these factors, to the extent relevant, based primarily on historical data, and use these estimates to determine the assumptions underlying our reserve calculations. Given the extensive degree of judgment and uncertainty used in developing these estimates, it is possible that our estimates could develop either favorably or unfavorably.

The discount rate is the interest rate at which future benefit cash flows are discounted to determine the present value of those cash flows. The discount rate we select is a critical estimate, as higher discount rates result in lower reserves. We set the discount rate based on the current investment yield of the portfolio of assets supporting our life and disability reserves. If the discount rate we select in estimating our reserves is lower (higher) than our actual future portfolio returns, our reserves may be higher (lower) than necessary. Our discount rate for life and disability reserves at September 30, 2006 decreased by .22% and .03%, respectively when compared to the rates used at December 31, 2005. The discount rates we selected for disability and life reserves at September 30, 2006 were slightly lower than the rates selected at December 31, 2005 as a result of lower investment yields on the portfolio of assets supporting these reserves. Based on our historical experience, it is reasonably possible that the assumed discount rates for our life and disability reserves may vary by plus or minus .25% from year to year. A .25% decrease in the discount rates selected for our life and disability reserves would have increased current and future life and disability benefit costs by approximately $12 million for the nine months ended September 30, 2006. For disability claims and a portion of our life claims, we must estimate the timing of benefit payments, which takes into consideration the maximum benefit period and the probabilities of recovery (i.e., recovery rate) or death (i.e., mortality rate) of the member. Benefit payments may also be affected by a change in employment status of a disabled member, for example if the member returns to work on a part-time basis. Estimating the recovery and mortality rates of our members is complex. Our actuaries evaluate our current and historical claim patterns, the timing and amount of any Social Security offset (for disability only), as well as other factors including the relative ages of covered members and the duration of disability when developing these assumptions. For disability reserves, if our actual recovery and mortality rates are lower (higher) than our estimates, our reserves will be lower (higher) than required to cover future disability benefit payments. For certain life reserves, if the actual recovery rates are lower (higher) than our estimates or the actual mortality rates are higher (lower) than our estimates, our reserves will be lower (higher) than required to cover future life benefit payments. We use standard industry tables

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and our historical claim experience to develop our estimated recovery and mortality rates. Claim reserves for our disability and life claims are sensitive to these assumptions. Our historical experience has been that our recovery or mortality rates for our life and disability reserves may vary by less than one percent during the course of a year. A one percent less (more) favorable assumption for our recovery or mortality rates would have increased (decreased) current and future life and disability benefit costs by approximately $5 million for the nine months ended September 30, 2006. When establishing our reserves at September 30, 2006, we have adjusted our estimates of recovery and mortality rates based on our recent experience.

We estimate a reserve for claims incurred but not yet reported for life products largely based on completion factors. The completion factors we use are based on our historical experience and reflect judgments and possible adjustments for data such as claim inventory levels, claim payment patterns, changes in business volume and other factors. If claims are submitted or processed on a faster (slower) pace than historical periods, the actual claims may be more (less) complete than originally estimated using our completion factors, which may result in reserves that are higher (lower) than required to cover future life benefit payments. At September 30, 2006, we held approximately $232 million in reserves for life claims incurred but not yet reported.

Long-term Care We establish a reserve for future policy benefits for our long-term care products at the time each policy is issued based on the present value of future benefit payments less the present value of future premiums. In establishing this reserve, we must evaluate assumptions about mortality, morbidity, lapse rates and the rate at which new claims are submitted to us. We estimate the future policy benefits reserve for long-term care products using these assumptions and actuarial principles. For long-duration insurance contracts, these original assumptions are used throughout the life of the policy and are not subsequently modified unless the reserves are deemed to be inadequate. A portion of our reserves for long-term care products also reflect our estimates relating to members currently receiving benefits. These reserves are estimated primarily using recovery and mortality rates, as described above.

Premium Deficiency Reserves In cases where we project future policy benefit costs will exceed our existing reserves plus anticipated future premiums, we establish premium deficiency reserves for the amount of the expected loss in excess of expected future premiums. Anticipated investment income is considered in the calculation of expected losses for certain contracts. Any such reserves established would normally cover expected losses until the next policy renewal dates for the related policies. We did not have any material premium deficiency reserves at September 30, 2006. NEW ACCOUNTING STANDARDS Refer to Note 2 of Condensed Notes to Consolidated Financial Statements for a discussion of Statement of Financial Accounting Standards No. 123 Revised, “Share-Based Payment”, which was adopted retrospectively in 2006. REGULATORY ENVIRONMENT Refer to “Regulatory Environment” in our 2005 Annual Report for information on regulation of our business. FORWARD-LOOKING INFORMATION/RISK FACTORS The “Forward-Looking Information/Risk Factors” portion of our 2005 Annual Report contains a discussion of important risk factors related to our business.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk Refer to the information contained in “MD&A – INVESTMENTS.” Item 4. Controls and Procedures Disclosure Controls and Procedures We maintain disclosure controls and procedures, which are designed to ensure that information that we are required to disclose in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. An evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2006 was conducted under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were adequate and designed to ensure that material information relating to Aetna Inc. and its consolidated subsidiaries would be made known to the Chief Executive Officer and Chief Financial Officer by others within those entities, particularly during the periods when periodic reports under the Exchange Act are being prepared. Refer to the Certifications by our Chief Executive Officer and Chief Financial Officer filed as Exhibits 31.1 and 31.2 to this report. Changes in Internal Control over Financial Reporting There has been no change in our internal control over financial reporting, identified in connection with the evaluation of such control, that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II OTHER INFORMATION Item 1. Legal Proceedings Managed Care Class Action Litigation From 1999 through early 2003, we were involved in purported class action lawsuits as part of a wave of similar actions targeting the health care payor industry and, in particular, the conduct of business by managed care companies. These cases, brought on behalf of health care providers (the “Provider Cases”), alleged generally that we and other defendant managed care organizations engaged in coercive behavior or a variety of improper business practices in dealing with health care providers and conspired with one another regarding this purported wrongful conduct. Effective May 21, 2003, we and representatives of over 900,000 physicians, state and other medical societies entered into an agreement (the “Physician Settlement Agreement”) settling the lead physician Provider Case, which was pending in the United States District Court for the Southern District of Florida (the “Florida Federal Court”). We believe that the Physician Settlement Agreement, which has received final court approval, resolved all then pending Provider Cases filed on behalf of physicians that did not opt out of the settlement. During the second quarter of 2003, we recorded a charge of $75 million ($115 million pretax) (included in other operating expenses) in connection with the Physician Settlement Agreement, net of an estimated insurance recoverable of $72 million pretax. We believe our insurance policies with third party insurers apply to this matter and have been vigorously pursuing recovery from those insurers in Pennsylvania state court (the “Coverage Litigation”). During the second quarter of 2006, the Philadelphia, Pennsylvania state trial court issued a summary judgment ruling dismissing all of our claims in the Coverage Litigation. We have appealed that ruling and intend to continue to vigorously pursue recovery from our third party insurers. However, as a result of that ruling, we concluded that the estimated insurance recoverable of $72 million pretax that was recorded in connection with the Physician Settlement Agreement is no longer probable of collection for accounting purposes, and therefore, during the second quarter of 2006, we wrote-off that recoverable. We continue to work with plaintiffs’ representatives in implementing the Physician Settlement Agreement and the issues that may arise under that agreement.

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Several Provider Cases filed in 2003 on behalf of purported classes of chiropractors and/or all non-physician health care providers also make factual and legal allegations similar to those contained in the other Provider Cases, including allegations of violations of the Racketeer Influenced and Corrupt Organizations Act. These Provider Cases seek various forms of relief, including unspecified damages, treble damages, punitive damages and injunctive relief. These Provider Cases have been transferred to the Florida Federal Court for consolidated pretrial proceedings. We intend to defend each of these cases vigorously. Insurance Industry Brokerage Practices Matters We have received subpoenas and other requests for information from the New York Attorney General, the Connecticut Attorney General, other attorneys general and various insurance and other regulators with respect to an industry wide investigation into certain insurance brokerage practices, including broker compensation arrangements, bid quoting practices and potential antitrust violations. We may receive additional subpoenas and requests for information from these attorneys general and regulators. We are cooperating with these inquiries. In connection with this industry wide review, we have received, and may receive, additional subpoenas and requests for information from other attorneys general and other regulators, and we have been named in related litigation. Other Litigation and Regulatory Proceedings We are involved in numerous other lawsuits arising, for the most part, in the ordinary course of our business operations, including employment litigation and claims of bad faith, medical malpractice, non-compliance with state regulatory regimes, marketing misconduct, failure to timely pay medical claims, investment activities, patent infringement and other intellectual property litigation and other litigation in our Health Care and Group Insurance businesses. Some of these other lawsuits are or are purported to be class actions. We intend to defend these matters vigorously. In addition, our current and past business practices are subject to review by, and from time to time we receive subpoenas and other requests for information from, various state insurance and health care regulatory authorities and other state and federal authorities. There also continues to be heightened review by regulatory authorities of the managed health care industry’s business practices, including utilization management, delegated arrangements and claim payment practices. As a leading national managed care organization, we regularly are the subject of such reviews. These reviews may result, and have resulted, in changes to or clarifications of our business practices, as well as fines, penalties or other sanctions. We are unable to predict at this time the ultimate outcome of the remaining Provider Cases, the insurance industry brokerage practices matters or other litigation and regulatory proceedings, and it is reasonably possible that their outcome could be material to us. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The following table provides information about our monthly share repurchases as part of publicly announced programs for the three months ended September 30, 2006:

Total Number of Approximate Dollar Shares Purchased Value of Shares

as Part of Publicly That May Yet Be Total Number of Average Price Announced Purchased Under the

(Millions, except per share amounts) Shares Purchased Paid Per Share Plans or Programs Plans or ProgramsJuly 1, 2006 - July 31, 2006 1.0 31.95$ 1.0 1,127.9$ August 1, 2006 - August 31, 2006 21.2 34.94 21.2 388.4 September 1, 2006 - September 30, 2006 5.2 38.69 5.2 937.2 Total 27.4 35.55$ 27.4 N/A

Issuer Purchases Of Equity Securities

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On January 27, 2006, April 28, 2006 and September 29, 2006, we announced that our Board authorized share repurchase programs for the repurchase of up to $750 million, $820 million and $750 million, respectively, of common stock ($2.3 billion in aggregate). During the third quarter of 2006, we repurchased approximately 27 million shares of common stock at a cost of $973 million, (approximately $59 million of these repurchase transactions were settled in early October 2006), completing the January 27, 2006 authorization and utilizing a portion of the April 28, 2006 authorization. At September 30, 2006, we had authorization to repurchase up to approximately $937 million of common stock remaining under the April 28, 2006 and September 29, 2006 authorizations. On January 27, 2006, the Board declared a two-for-one stock split of our common stock, which was effected in the form of a 100% common stock dividend. All shareholders of record at the close of business on February 7, 2006 (the “Shareholders of Record”) received one additional share of common stock for each share held on that date. The additional shares of common stock were distributed to the Shareholders of Record in the form of a stock dividend on February 17, 2006. All share and per share amounts have been adjusted to reflect the stock split for all periods. In connection with the stock split, the Board approved an amendment to our Articles of Incorporation. This amendment increased the number of our authorized common shares to 2.9 billion shares on February 17, 2006.

Item 6. Exhibits Exhibits to this Form 10-Q are as follows:

10 Material Contracts

10.1 Form of Aetna Inc. 2000 Stock Incentive Plan - Stock Appreciation Right Terms Of Award.

10.2 Form of Aetna Inc. 2000 Stock Incentive Plan - Restricted Stock Unit Terms Of Award.

10.3 Form of Aetna Inc. 2000 Stock Incentive Plan - Aetna Performance Unit Award Agreement.

10.4 Form of Aetna Inc. Non-Employee Director Compensation Plan - Restricted Stock Unit Agreement.

10.5 Consulting Agreement made as of October 1, 2006 between Aetna Inc. and John W. Rowe, M.D.

11 Statements re: computation of per share earnings

11.1 Incorporated herein by reference to Note 4 of Condensed Notes to Consolidated Financial Statements in this Form 10-Q.

12 Statements re: computation of ratios

12.1 Computation of ratios.

15 Letter re: unaudited interim financial information

15.1 Letter from KPMG LLP acknowledging awareness of the use of a report on unaudited interim financial information, dated October 26, 2006.

31 Rule 13a-14(a)/15d-14(a) Certifications

31.1 Certification.

31.2 Certification.

32 Section 1350 Certifications

32.1 Certification.

32.2 Certification.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Aetna Inc. Registrant Date: October 26, 2006 By /s/ Ronald M. Olejniczak Ronald M. Olejniczak Vice President and Controller (Chief Accounting Officer)

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INDEX TO EXHIBITS

Exhibit Filing Number Description Method 10 Material Contracts

10.1 Form of Aetna Inc. 2000 Stock Incentive Plan - Stock Appreciation Right Terms Of Award.

Electronic

10.2 Form of Aetna Inc. 2000 Stock Incentive Plan - Restricted Stock Unit Terms Of Award. Electronic

10.3 Form of Aetna Inc. 2000 Stock Incentive Plan - Aetna Performance Unit Award Agreement.

Electronic

10.4 Form of Aetna Inc. Non-Employee Director Compensation Plan - Restricted Stock Unit Agreement.

Electronic

10.5 Consulting Agreement made as of October 1, 2006 between Aetna Inc. and John W. Rowe, M.D.

Electronic

12 Statements re: computation of ratios

12.1 Computation of ratios. Electronic 15 Letter re: unaudited interim financial information

15.1 Letter from KPMG LLP acknowledging awareness of the use of a report on unaudited interim financial information, dated October 26, 2006.

Electronic

31 Rule 13a-14(a)/15d-14(a) Certifications

31.1 Certification. Electronic

31.2 Certification. Electronic 32 Section 1350 Certifications

32.1 Certification. Electronic

32.2 Certification. Electronic

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1

Exhibit 10.1

AETNA INC. 2000 STOCK INCENTIVE PLAN

STOCK APPRECIATION RIGHT TERMS OF AWARD

Pursuant to its 2000 Stock Incentive Plan, Aetna Inc. has granted a stock appreciation right on shares of Aetna Inc. Common Stock. The number of shares represented by this right, the Grant Price and vesting information is included on the website of the designated broker, currently UBS Financial Services, Inc. and in the Notice of Stock Appreciation Right Grant, if applicable. The Stock Appreciation Right is issued on the terms and conditions hereinafter set forth.

ARTICLE I

DEFINITIONS (a) "Affiliate" means an entity at least a majority of the total voting power of the then-outstanding voting

securities of which is held, directly or indirectly, by the Company and/or one or more other Affiliates. (b) "Board" means the Board of Directors of Aetna Inc. (c) “Change in Control” means the happening of any of the following: (i) When any “person” as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended

(the “Exchange Act”) and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act but excluding the Company and any Subsidiary thereof and any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 20 percent or more of the combined voting power of the Company’s then outstanding securities;

(ii) When, during any period of 24 consecutive months, the individuals who, at the beginning of such

period, constitute the Board (the “Incumbent Directors”) cease for any reason other than death to constitute at least a majority thereof, provided that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this paragraph (ii); or

(iii) The occurrence of a transaction requiring stockholder approval for the acquisition of the Company by

an entity other than the Company or a Subsidiary through purchase of assets, or by merger, or otherwise.

2

Notwithstanding the foregoing, in no event shall a “Change in Control” be deemed to have occurred (i) as a result of the formation of a Holding Company, or (ii) with respect to Grantee, if Grantee is part of a “group,” within the meaning of Section 13(d)(3) of the Exchange Act as in effect on the effective date, which consummates the Change in Control transaction. In addition, for purposes of the definition of “Change in Control” a person engaged in business as an underwriter of securities shall not be deemed to be the “beneficial owner” of, or to “beneficially own,” any securities acquired through such person’s participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition.

(d) "Committee" means the Board's Committee on Compensation and Organization or any successor thereto. (e) "Common Stock" means shares of the Company's Common Stock, $.01 par value per share. (f) "Company" means Aetna Inc. (g) "Disability" means long-term disability as defined under the terms of the Company's applicable long-term

disability plans or policies. (h) "Effective Date” means the date of grant of this Stock Appreciation Right, as approved by the Committee. (i) “Exercise Date” means the date the Grantee has notified the designated broker to exercise all or a portion of

the Stock Appreciation Right. (j) "Fair Market Value" means the closing price of the Common Stock as reported by the Consolidated Tape of

the New York Stock Exchange Listed Shares on the date such value is to be determined, or, if no shares were traded on such day, on the next day on which the Common Stock was traded.

(k) “Fundamental Corporate Event” shall mean any stock dividend, extraordinary cash dividend,

recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Common Stock at a price substantially below fair market value, or similar event.

(l) “Grantee” means the person to whom this Stock Appreciation Right has been granted. (m) “Grant Price” means the dollar amount per share of Common Stock that is the basis for determining the

appreciation in value of the Common Stock. (n) “Holding Company” means an entity that becomes a holding company for the Company or its businesses as

a part of any reorganization, merger, consolidation or other transaction, provided that the outstanding shares of common stock of such entity and the combined voting power of the then outstanding voting securities of such entity entitled to vote generally in the election of directors is, immediately after such reorganization, merger, consolidation or other transaction, beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively of the voting stock outstanding immediately prior to such reorganization, merger, consolidation or other transaction in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or other transaction, of such outstanding voting stock.

(o) "Plan" means the Aetna Inc. 2000 Stock Incentive Plan. (p) "Retirement" means the termination of employment of a Grantee from active service with the Company, a

Subsidiary or Affiliate provided the Grantee’s age and completed years of service total 65 or more points at termination of employment.

3

(q) “SAR” means Stock Appreciation Right. (r) "Shares Granted" means the number of shares of Common Stock represented by the Stock Appreciation

Right, or such other amount as may result by operation of Article IV of this Agreement. (s) "Shares of Stock" or "Stock" means the Common Stock. (t) “Stock Appreciation Right” means the right granted herein to be paid the excess, as of the Exercise Date, of

(i) the Fair Market Value of the shares of Common Stock associated with this Stock Appreciation Right (or the portion thereof that is surrendered on exercise) over (ii) the Grant Price of such Stock Appreciation Right.

(u) “Stock Appreciation Rights Vested” means number of Stock Appreciation Rights exercisable on any given

date. (v) "Subsidiary" means any entity of which, at the time such subsidiary status is to be determined, at least 50%

of the total combined voting power of all classes of stock in such entity is held by the Company and its Subsidiaries (exclusive of ownership by the entity whose subsidiary status is being determined).

(w) "Successor" means the legal representative of the estate of a deceased Grantee or the person or persons who

shall acquire the right to exercise a SAR by bequest or inheritance or by reason of the death of the Grantee. (x) "Term" means the period during which the SAR granted hereby may be exercised. (y) “Vest Date” means the date on which a portion of the SAR becomes exercisable pursuant to the Terms of the

Award and, as set forth on the website of the designated broker and in the Notice of Stock Appreciation Right Grant, if applicable.

ARTICLE II

TERM OF SAR AND EXERCISE

(a) Subject to the terms of this Agreement, the term of the SAR shall commence on the first Vest Date and shall

terminate, unless sooner terminated by the terms of the Plan or this Terms of Award Agreement, at:

(i) The close of the Company's business on the day preceding the _____ anniversary of the Effective Date, if the Company is open for business on such day; or

(ii) The close of the Company's business on the next preceding day that the Company is open for business.

(b) The SAR is exercisable in installments, each installment to become exercisable as of the Vest Date in

accordance with the terms of the Plan and this Terms of Award Agreement. Once an installment is vested, it may be exercised in whole or in part only during the Term of the SAR.

4

ARTICLE III

METHOD OF SAR EXERCISE

In order to exercise this SAR, Grantee must comply with procedures adopted by the Company from time to time. Under current procedures, the Grantee must exercise the SAR through the Company’s designated broker. In addition, if the Grantee has been notified that he or she must consult with a member of the Company's Law Department prior to engaging in transactions in Aetna stock, Grantee must consult with the Law Department prior to exercising the SAR. Upon exercise of the SAR, payment (net of federal, state, local, social security and medicare taxes, if applicable) shall be paid in Common Stock as soon as administratively possible. The resulting shares of Common Stock will be deposited in a brokerage account established in Grantee’s name at the designated broker.

ARTICLE IV

CAPITAL CHANGES In the event that the Committee shall determine that any Fundamental Corporate Event affects the Common Stock such that an adjustment is required to preserve, or to prevent enlargement of, the benefits or potential benefits made available under this SAR or the Plan, then the Committee shall, in such manner as the Committee may deem equitable, adjust the (i) the number and kind of shares subject to the SAR on or (ii) the SAR Grant Price. Additionally, the Committee may make provision for a cash payment to a Grantee or the Successor of the Grantee in satisfaction of all or any portion of the SAR. The number of Shares of Stock subject to the SAR shall always be a whole number.

ARTICLE V

CHANGE IN CONTROL Upon the occurrence of a Change in Control, each unvested SAR shall become vested and immediately exercisable and shall be exercisable in accordance with the terms of this Agreement.

ARTICLE VI

TERMINATION OF SAR

(a) Except as provided in (e) below, if the Grantee shall, for reason of death or long term disability, cease to be employed by the Company, its Subsidiaries or Affiliates after the Effective Date, the SAR shall become vested and immediately exercisable and the Grantee or Successor of the Grantee may exercise the SAR until the earlier of:

(i) The expiration of the Term of the SAR; or (ii) A period not to exceed ____ years following such cessation of employment.

5

(b) Except as provided in (e) below, if Grantee shall, for reason of Retirement, cease to be employed by the

Company, its Subsidiaries or Affiliates after the Effective Date, the Grantee will become immediately vested and may immediately exercise any SAR that would have otherwise become vested within ____ year(s) from the Grantee’s termination of employment, and the Grantee or Successor of the Grantee may exercise the SAR until the earlier of:

(i) The expiration of the Term of the SAR; or (ii) A period not to exceed ____ years following such cessation of employment.

(c) Except as provided in (d) and (e) below, if the Grantee shall, for a reason other than death, Disability or

Retirement, cease to be employed by the Company, its Subsidiaries or Affiliates during the Term of the SAR, the Grantee may exercise a vested SAR until the earlier of:

(i) The expiration of the term of the SAR; or (ii) A period not to exceed _____ days following such cessation of employment.

(d) Except as provided in (a) or (b) above, any SAR, or portion of a SAR that has not become vested and exercisable at the time of cessation of employment shall terminate immediately upon such cessation of employment and may not be exercised thereafter. Provided, however, if Grantee’s employment is terminated by the Company other than for cause and Grantee has not previously, or does not subsequently, vest to any portion of the SAR in accordance with its terms, then upon the forfeiture of the entire SAR, the Company shall pay Grantee an amount equal to the SAR value on a single share of Common Stock, whether or not the forfeited SAR related to more than a single share of Common Stock, calculated as of the date of termination of employment under the same method as the Company calculates its SAR expense charge for purposes of its financial statement reporting, if requested by Grantee, within 30 days of such cessation of employment.

(e) No SAR may be exercised after the Company has terminated the employment of the Grantee for cause,

except that the Committee may, in its sole discretion, permit the exercise of a vested SAR for a period of up to _____ days in cases where the Committee shall determine such exercise period is warranted under the particular circumstances. The Company may terminate the SAR (including a vested SAR) if Grantee has willfully engaged in gross misconduct or other serious impropriety which the Company determines is likely to be damaging or detrimental to the Company, any Subsidiary or Affiliate.

(f) If the Grantee shall die after termination of employment, such termination being for a reason other than

Disability or Retirement, but while the SAR is still in effect and such termination occurs after the Term of the SAR has commenced, a vested SAR may be exercised by the Successor of the Grantee until the earlier of:

(i) The expiration of the Term of the SAR; or (ii) ___ year(s) from the date of termination of employment of the Grantee.

(g) Employment for purposes of determining the vesting rights of the Grantee under this Article VI shall mean continuous full-time salaried employment with the Company, a Subsidiary or an Affiliate, except that the period during which the Grantee is on vacation, sick leave, or other pre-approved leave of absence (provided there is no actual termination of employment), or in receipt of nine weeks salary continuation or severance pay shall not interrupt the continuous employment of the Grantee.

(h) Except as otherwise herein provided, exercise of the SAR, whether by the Grantee or the Successor of the

Grantee, shall be subject to all terms and conditions of this Agreement.

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ARTICLE VII

OTHER TERMS

(a) Grantee understands that the Grantee shall not have any rights as stockholder by virtue of the grant of an

SAR but only with respect to shares of Common Stock actually issued to the Grantee in accordance with the terms hereof.

(b) Anything herein to the contrary notwithstanding, the Company may postpone the exercise of the SAR or any

portion thereof for such time as the Committee in its discretion may deem necessary, in order to permit the Company with reasonable diligence (i) to effect or maintain registration under the Securities Act of 1933, as amended, of the Plan or the shares of Common Stock issuable upon the exercise of the SAR or (ii) to determine that the Plan and such shares are exempt from registration; and the Company shall not be obligated by virtue of this Agreement or any provision of the Plan to recognize the exercise of the SAR or to sell or issue shares of Common Stock in violation of said Act or of the law of any government having jurisdiction thereof. Any such postponement shall not extend the Term of the SAR; and neither the Company nor its Board shall have any obligation or liability to the Grantee, or to the Grantee's Successor, with respect to any shares of Common Stock as to which the SAR shall lapse because of such postponement.

(c) The SAR shall be nontransferable and nonassignable except by will and by the laws of descent and

distribution. During the Grantee's lifetime, the SAR may be exercised only by the Grantee. (d) The SAR is not an incentive stock option as described in the Internal Revenue Code of 1986, as amended,

Section 422A (b). (e) This Agreement is subject to the 2000 Stock Incentive Plan heretofore adopted by the Company and

approved by its shareholders. The terms and provisions of the Plan (including any subsequent amendments thereto) are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

(f) Anything herein to the contrary notwithstanding, a Grantee whose SAR has been forfeited as a result of

termination of employment due to U.S. Military Service and who is later re-employed (in a full-time active status) after discharge within the time period set in 38 U.S.C. Section 4312 will be eligible to have the forfeited SAR reinstated for the original Term pursuant to procedures established by the Company for this purpose.

(g) Nothing in this Agreement shall interfere with a limit in anyway the right of the Company or any Subsidiary

or Affiliate to terminate the Grantee’s employment at any time. Neither the execution and delivery of this Agreement nor the granting of the SAR shall constitute or be evidence of any agreement or understanding, express or implied, on the part of the Company or any of its Subsidiaries to employ Grantee for any period.

(h) This SAR is an unfunded obligation of the Company and nothing in this Agreement shall be construed to

create any claim against particular assets or require the Company to segregate or otherwise set aside any assets or create any fund to meet its obligations hereunder.

(i) The Company shall have the power to withhold, an amount sufficient to satisfy Federal, state and local,

social security and medicare withholding tax requirements, if applicable. Any social security calculation or other adjustments discovered after the net share payment will be settled in cash in the Grantee’s paystub not in Common Stock.

ARTICLE VIII

EMPLOYEE COVENANTS

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(a) As consideration for the grant of the SAR, without prior written consent of the Company: (i) Grantee will not (except to the extent required by an order of a court having competent jurisdiction or

under subpoena from an appropriate government agency) disclose to any third person, whether during or subsequent to Grantee’s Employment, any trade secrets, confidential information and proprietary materials, which may include, but are not limited to, the following categories of information and materials: customer lists and identities; provider lists and identities; employee lists and identities; product development and related information; marketing plans and related information; sales plans and related information; premium or other pricing information; operating policies and manuals; research; payment rates; methodologies; procedures; contractual forms; business plans; financial records; computer programs; database; or other financial, commercial, business or technical information related to the Company or any Subsidiary or Affiliate unless such information has been previously disclosed to the public by the Company or has become public knowledge other than by a breach of this Agreement; provided, however, that this limitation shall not apply to any such disclosure made while Grantee is employed by the Company, any Subsidiary or Affiliate if such disclosure occurred in connection with the performance of Grantee’s job as an employee of the Company, any Subsidiary or Affiliate;

(ii) Grantee will not, during and for a period of 12 months following Grantee’s termination of

Employment, directly or indirectly induce or attempt to induce any employee to be employed by or to perform services elsewhere;

(iii) Grantee will not, during and for a period of 12 months following Grantee's termination of

Employment, directly or indirectly, induce or attempt to induce any agent or agency, broker, supplier or health care provider of the Company or any Subsidiary to cease or curtail providing services to the Company or any Subsidiary; and

(iv) Grantee will not, during and for a period of 12 months following Grantee’s termination of

Employment, directly or indirectly solicit or attempt to solicit the trade of any individual or entity which, at the time of such solicitation, is a customer of the Company, any Subsidiary or Affiliate, or which the Company, any Subsidiary or Affiliate is undertaking reasonable steps to procure as a customer at the time of or immediately preceding termination of Employment; provided, however, that this limitation shall only apply to any product or service which is in competition with a product or service of the Company, any Subsidiary or Affiliate and shall apply only with respect to a customer or prospective customer with whom the Grantee has been directly or indirectly involved.

In addition:

(v) Following the termination of Grantee’s Employment, Grantee shall provide assistance to and shall cooperate with the Company or a Subsidiary or Affiliate, upon its reasonable request and without additional compensation, with respect to matters within the scope of Grantee’s duties and responsibilities during Employment, provided that any reasonable out-of-pocket expenses Grantee incurs in connection with any assistance Grantee has been requested to provide under this provision for items including, but not limited to, transportation, meals, lodging and telephone, shall be reimbursed by the Company. The Company agrees and acknowledges that it shall, to the maximum extent possible under the then prevailing circumstances, coordinate, or cause a Subsidiary or Affiliate to coordinate, any such request with Grantee’s other commitments and responsibilities to minimize the degree to which such request interferes with such commitments and responsibilities;

(vi) Grantee shall promptly notify the Company’s General Counsel if Grantee is contacted by a regulatory

or self-regulatory agency with respect to matters pertaining to the Company or by an attorney or other individual who informs you that he/she has filed, intends to file, or is considering filing a claim or complaint against the Company; and

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(vii) Grantee acknowledges that all original works of authorship that are created by Grantee (solely or

jointly with others) within the scope of Grantee’s employment which are protectable by copyright are “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C., Section 101). Grantee further acknowledges that while employed by the Company, Grantee may develop ideas, inventions, discoveries, innovations, procedures, methods, know-how or other works which relate to the Company’s current or are reasonably expected to relate to the Company’s future business that may be patentable or subject to trade secret protection. Grantee agrees that all such works of authorship, ideas, inventions, discoveries, innovations, procedures, methods, know-how and other works shall belong exclusively to the Company and the Grantee hereby assigns all right, title and interest therein to the Company. To the extent any of the foregoing works may be patentable, Grantee agrees that the Company may file and prosecute any application for patents for such works and that the Grantee will, on request, execute assignments to the Company relating to (and take all such further steps as may be reasonably necessary to perfect the Company’s sole and exclusive ownership of) any such application and any patents resulting therefrom.

(b) If any provision of Article VIII(a) is determined by a court of competent jurisdiction not to be enforceable in

the manner set forth herein, the Company and Grantee agree that it is the intention of the parties that such provision should be enforceable to the maximum extent possible under applicable law and that such court shall reform such provision to make it enforceable in accordance with the intent of the parties.

(c) Grantee acknowledges that a material part of the inducement for the Company to grant the SAR is Grantee’s

covenants set forth in Article VIII(a) and that the covenants and obligations of Grantee with respect to nondisclosure, nonsolicitation, cooperation and intellectual property rights relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants and obligations will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Grantee agrees that, if Grantee shall breach any of those covenants or obligations, Grantee shall not be entitled to exercise the SAR or be entitled to retain any income therefrom and the Company shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) restraining Grantee from committing any violation of the covenants and obligations contained in Article VIII. The remedies in the preceding sentence are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity as a court or arbitrator shall reasonably determine.

(d) Employment Dispute Arbitration Program - Mandatory Binding Arbitration of Employment Disputes.

(i) Except as otherwise specified in this Agreement, the Grantee and the Company agree that all employment-related legal disputes between them will be submitted to and resolved by binding arbitration, and neither the Grantee nor the Company will file or participate as an individual party or member of a class in a lawsuit in any court against the other with respect to such matters. This shall apply to claims brought on or after the date the Grantee accepts this Agreement, even if the facts and circumstances relating to the claim occurred prior to that date and regardless of whether Grantee or the Company previously filed a complaint/charge with a government agency concerning the claim.

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For purposes of Article VIII (d) of this Agreement, “the Company” includes Aetna Inc., its subsidiaries and related companies, their predecessors, successors and assigns, and those acting as representatives or agents of those entities. THE GRANTEE UNDERSTANDS THAT, WITH RESPECT TO CLAIMS SUBJECT TO THE ARBITRATION REQUIREMENT, ARBITRATION REPLACES THE RIGHT OF THE GRANTEE AND THE COMPANY TO SUE OR PARTICIPATE IN A LAWSUIT. THE GRANTEE ALSO UNDERSTANDS THAT IN ARBITRATION, A DISPUTE IS RESOLVED BY AN ARBITRATOR INSTEAD OF A JUDGE OR JURY, AND THE DECISION OF THE ARBITRATOR IS FINAL AND BINDING.

(ii) THE GRANTEE UNDERSTANDS THAT THE ARBITRATION PROVISIONS OF THIS

AGREEMENT AFFECT THE LEGAL RIGHTS OF THE GRANTEE AND THE COMPANY AND ACKNOWLEDGES THAT THE GRANTEE HAS BEEN ADVISED TO, AND HAS BEEN GIVEN THE OPPORTUNITY TO, OBTAIN LEGAL ADVICE BEFORE SIGNING THIS AGREEMENT.

(iii) Article VIII (d) of this Agreement does not apply to workers’ compensation claims, unemployment

compensation claims, and claims under the Employee Retirement Income Security Act of 1974 (“ERISA”) for employee benefits. A dispute as to whether Article VIII (d) of this Agreement applies must be submitted to the binding arbitration process set forth in this Agreement.

(iv) The Grantee and/or the Company may seek emergency or temporary injunctive relief from a court

(including with respect to claims arising out of Article VIII (a) in accordance with applicable law). However, except as provided in Article VIII (c) of this Agreement, after the court has issued a ruling concerning the emergency or temporary injunctive relief, the Grantee and the Company shall be required to submit the dispute to binding arbitration pursuant to this Agreement.

(v) Unless otherwise agreed, the arbitration will be administered by the American Arbitration Association

(the “AAA”) and will be conducted pursuant to the AAA’s National Rules for Resolution of Employment Disputes (the “Rules”), as modified in this Agreement, in effect at the time the request for arbitration is filed. The AAA’s Rules are available on the AAA’s website at www.adr.org. THE GRANTEE ACKNOWLEDGES THAT THE COMPANY HAS ENCOURAGED THE GRANTEE TO READ THESE RULES PROMPTLY AND CAREFULLY AND THAT THE GRANTEE HAS BEEN AFFORDED SUFFICIENT OPPORTUNITY TO DO SO.

(vi) If the Company initiates a request for arbitration, the Company will pay all of the administrative fees

and costs charged by the AAA, including the arbitrator’s compensation and charges for hearing room rentals, etc. If the Grantee initiates a request for arbitration or submits a counterclaim to the Company’s request for arbitration, the Grantee shall be required to contribute One Hundred Dollars ($100.00) to those administrative fees and costs, payable to the AAA at the time the Grantee's request for arbitration or counterclaim is submitted. The Company may increase the contribution amount in the future without amending this Agreement, but not to exceed the maximum permitted under the AAA rules then in effect. In all cases, the Grantee and the Company shall be responsible for payment of any fees assessed by the arbitrator as a result of that party’s delay, request for postponement, failure to comply with the arbitrator’s rulings and for other similar reasons.

(vii) The Grantee and the Company may choose to be represented by legal counsel in the arbitration

process and shall be responsible for their own legal fees, expenses and costs. However, the arbitrator shall have the same authority as a court to order the Grantee or the Company to pay some or all of the other’s legal fees, expenses and costs, in accordance with applicable law.

(viii) Unless otherwise agreed, there shall be a single arbitrator, selected by the Grantee and the Company

from a list of qualified neutrals furnished by the AAA. If the Grantee and the Company cannot agree on an arbitrator, one will be selected by the AAA.

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(ix) Unless otherwise agreed, the arbitration hearing will take place in the city where the Grantee works or

last worked for the Company. If the Grantee and the Company disagree as to the proper locale, the AAA will decide.

(x) The Grantee and the Company shall be entitled to conduct limited pre-hearing discovery. Each may

take the deposition of one person and anyone designated by the other as an expert witness. The party taking the deposition shall be responsible for all associated costs, such as the cost of a court reporter and the cost of an original transcript. Each party also has the right to submit one set of ten written questions (including subparts) to the other party, which must be answered under oath, and to request and obtain all documents on which the other party relies in support of its answers to the written questions. Additional discovery may be permitted by the arbitrator upon a showing that it is necessary for that party to have a fair opportunity to present a claim or defense.

(xi) The arbitrator shall apply the same substantive law that would apply if the matter were heard by a

court and shall have the authority to order the same remedies (but no others) as would be available in a court proceeding. The time limits for requesting arbitration or submitting a counterclaim and the administrative prerequisites for filing an arbitration claim or counterclaim are the same as they would be in a court proceeding. The arbitrator shall have the authority to consider and decide dispositive motions (motions seeking a decision on some or all of the claims or counterclaims without an arbitration hearing).

(xii) All proceedings, including the arbitration hearing and decision, are private and confidential, unless

otherwise required by law. Arbitration decisions may not be published or publicized without the consent of both the Grantee and the Company.

(xiii) Unless otherwise agreed, the arbitrator’s decision will be in writing with a brief summary of the

arbitrator’s opinion. (xiv) The arbitrator’s decision is final and binding on the Grantee and the Company. After the arbitrator’s

decision is issued, the Grantee or the Company may obtain an order of judgment from a court and may obtain a court order enforcing the decision. The arbitrator’s decision may be appealed to the courts only under the limited circumstances provided by law.

(xv) If the Grantee previously signed an agreement, including but not limited to an employment agreement,

containing arbitration provisions, those provisions are superseded by the arbitration provisions of this Agreement.

(xvi) If any provision of Article VIII (d) is found to be void or otherwise unenforceable, in whole or in part,

this shall not affect the validity of the remainder of Article VIII (d) and the remainder of the Agreement. All other provisions shall remain in full force and effect.

For purposes of this Article VIII, the term “Employment” shall refer to active employment with the Company, any Subsidiary or Affiliate, and shall not include severance periods.

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Exhibit 10.2

AETNA INC. 2000 STOCK INCENTIVE PLAN

RESTRICTED STOCK UNIT TERMS OF AWARD Pursuant to its 2000 Stock Incentive Plan (the “Plan”), Aetna Inc. (the “Company”) hereby grants Restricted Stock Units on the terms and conditions hereinafter set forth. The number of Restricted Stock Units awarded and vesting information is included in the website of the designated broker, currently UBS Financial Services, Inc. and in the Notice of Restricted Stock Unit Acknowledgement and Acceptance Form, if applicable. All capitalized terms used herein which are not otherwise defined herein shall have the meaning specified in the Plan.

ARTICLE I

DEFINITIONS (a) "Affiliate" means an entity at least a majority of the total voting power of the then-outstanding voting

securities of which is held, directly or indirectly, by the Company and/or one or more other Affiliates. (b) "Board" means the Board of Directors of Aetna Inc. (c) “Change in Control” means the happening of any of the following: (i) When any “person” as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended

(the “Exchange Act”) and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act but excluding the Company and any Subsidiary thereof and any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 20 percent or more of the combined voting power of the Company’s then outstanding securities;

(ii) When, during any period of 24 consecutive months, the individuals who, at the beginning of such

period, constitute the Board (the “Incumbent Directors”) cease for any reason other than death to constitute at least a majority thereof, provided that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this paragraph (ii); or

(iii) The occurrence of a transaction requiring stockholder approval for the acquisition of the Company by an entity other than the Company or a Subsidiary through purchase of assets, or by merger, or otherwise.

Notwithstanding the foregoing, in no event shall a “Change in Control” be deemed to have occurred (i) as a result of the formation of a Holding Company, or (ii) with respect to Grantee, if Grantee is part

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of a “group,” within the meaning of Section 13(d)(3) of the Exchange Act as in effect on the effective date, which consummates the Change in Control transaction. In addition, for purposes of the definition of “Change in Control” a person engaged in business as an underwriter of securities shall not be deemed to be the “Beneficial Owner” of, or to “beneficially own,” any securities acquired through such person’s participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition.

(d) "Committee" means the Board's Committee on Compensation and Organization or any successor thereto. (e) "Common Stock" means the Company's Common Shares, $.01 par value per share. (f) "Company" means Aetna Inc. (g) "Disability" means long-term disability as defined under the terms of the Company's applicable long-term

disability plans or policies. (h) "Effective Date" means the date of grant of this award of Restricted Stock Units. (i) “Fair Market Value" means the closing price of the Common Stock as reported by the Consolidated Tape

of the New York Stock Exchange Listed Shares on the date such value is to be determined, or, if no shares were traded on such date, on the next day on which the Common Stock was traded.

(j) “Fundamental Corporate Event” shall mean any stock dividend, extraordinary cash dividend,

recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Common Stock at a price substantially below fair market value, or similar event.

(k) "Grantee" means the person to whom this award has been granted. (l) “Holding Company” means an entity that becomes a holding company for the Company or its businesses

as a part of any reorganization, merger, consolidation or other transaction, provided that the outstanding shares of common stock of such entity and the combined voting power of the then outstanding voting securities of such entity entitled to vote generally in the election of directors is, immediately after such reorganization, merger, consolidation or other transaction, beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the voting stock outstanding immediately prior to such reorganization, merger, consolidation or other transaction in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or other transaction, of such outstanding voting stock.

(m) “Net Shares” means the number of shares of Common Stock which will be deposited in a brokerage

account in the Grantee’s name at the Company’s designated broker after shares have been withheld to satisfy applicable tax and withholding requirements upon vesting of the Restricted Stock Units.

(n) “Plan” means the Aetna Inc. 2000 Stock Incentive Plan. (o) “Restricted Period” means the period during which this award of Restricted Stock Units is not vested. (p) “Restricted Stock Units” means the number of shares of Common Stock represented by the number of

units awarded or such other amount as may result by operation of Article III of this Agreement. (q) "Retirement" means the termination of employment of a Grantee from active service with the Company, a

Subsidiary or Affiliate provided the Grantee’s age and completed years of service total 65 or more points at termination of employment.

(r) “Shares of Stock” or “Stock” means the Common Stock.

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(s) "Subsidiary" means an entity of which, at the time such subsidiary status is to be determined, at least 50%

of the total combined voting power of all classes of stock of such entity is held by the Company and/or one or more other subsidiaries.

(t) "Successor" means the legal representative of the estate of a deceased Grantee or the person or persons

who shall acquire the right to the Restricted Stock Units by bequest or inheritance or by reason of the death of the Grantee.

(u) “Vesting Date” means the date on which this award of Restricted Stock Units shall vest in accordance with

the terms of this Agreement.

ARTICLE II

RESTRICTED PERIOD Subject to the terms of this Agreement, the Restricted Stock Units will vest ____ years from the Effective Date of the Award or on such earlier date as provided in Article IV or V. On the Vesting Date, the Grantee shall vest to one share of Common Stock for each vested Restricted Stock Unit net of applicable taxes and withholding. Such Net Shares will be delivered to the Company’s designated broker, in a brokerage account established in the Grantee’s name, as soon as administratively possible after the Vesting Date.

ARTICLE III

CAPITAL CHANGES In the event that the Committee shall determine that any Fundamental Corporate Event affects the Common Stock such that an adjustment is required to preserve, or to prevent enlargement of, the benefits or potential benefits made available under this Plan, then the Committee shall, in such manner as the Committee may deem equitable, adjust the number and kind of shares subject to the award of Restricted Stock Units. Additionally, the Committee may make provision for cash payment to a Grantee or the Successor of the Grantee. However, the number of Restricted Stock Units shall always be a whole number.

ARTICLE IV

CHANGE IN CONTROL Upon the occurrence of a Change in Control, the Restricted Stock Units shall become immediately vested.

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ARTICLE V

TERMINATION OF EMPLOYMENT

(a) Except as provided in (e) below, if the Grantee shall, for reason of death or Long-Term Disability, cease to be employed by the Company, its Subsidiaries or Affiliates during the Restricted Period, the Restricted Stock Units shall become immediately vested and Net Shares will be deposited with the Company’s designated broker, in a brokerage account established in Grantee’s name as soon as administratively possible.

(b) Except as provided in (e) below, if, during the restricted period, Grantee shall cease to be employed by the

Company, its Subsidiaries or Affiliates during the Restricted Period, for reason of Retirement or involuntary termination of employment by the Company, a portion of the Restricted Stock Units shall vest in accordance with the following formula: (i) the number of completed months employed after the Effective Date divided by ____; multiplied by (ii) number of Restricted Stock Units. For purposes of this calculation, a month is complete on the day in the following month that corresponds to the Effective Date (e.g., February 10 to March 10). Net shares will be deposited with the Company’s designated broker in a brokerage account established in Grantee’s name as soon as administratively possible.

(c) Except as provided in (d) and (e) below, if the Grantee shall, for a reason other than death, Long-Term

Disability, Retirement or involuntary termination of employment by the Company, cease to be employed by the Company, its Subsidiaries or Affiliates during the Restricted Period, any unvested Restricted Stock Units shall be forfeited at the time of cessation of employment.

(d) Except as provided in (a) or (b) above, any Restricted Stock Unit not vested as of the date Grantee terminates employment shall be forfeited at the time of cessation of employment. Provided, however, if Grantee’s employment is terminated by the Company other than for cause and Grantee has not previously, or does not subsequently, vest to any portion of the Restricted Stock Unit in accordance with its terms, then upon the forfeiture of the entire Restricted Stock Unit, the Company will pay Grantee an amount equal to the value of a single share of Common Stock, whether or not the forfeited Restricted Stock Unit related to more than a single share of Common Stock, calculated as of the cessation of employment, if requested by Grantee, within ___ days of such cessation of employment.

(e) No Restricted Stock Unit will vest after the Company has terminated the employment of the Grantee for

cause, except with approval by the Committee, if its sole discretion, it deems a payment is warranted under the particular circumstances. In addition, the Restricted Stock Units will not vest if Grantee has willfully engaged in gross misconduct which the Company determines is likely to be damaging or detrimental to the Company, any Subsidiary or Affiliate.

(f) Employment for purposes of determining the vesting rights of the Grantee under this Article V shall mean continuous full-time salaried employment with the Company, a Subsidiary or an Affiliate, except that the period during which the Grantee is on vacation, sick leave, or other pre-approved leave of absence (provided there is no actual termination of employment), or in receipt of nine weeks salary continuation or severance pay shall not interrupt the continuous employment of the Grantee.

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ARTICLE VI

EMPLOYEE COVENANTS

(a) As consideration for this grant of Restricted Stock Units, without prior written consent of the Company: (i) Grantee will not (except to the extent required by an order of a court having competent jurisdiction or

under subpoena from an appropriate government agency) disclose to any third person, whether during or subsequent to Grantee’s Employment, any trade secrets, confidential information and proprietary materials, which may include, but are not limited to, the following categories of information and materials: customer lists and identities; provider lists and identities; employee lists and identities; product development and related information; marketing plans and related information; sales plans and related information; premium or other pricing information; operating policies and manuals; research; payment rates; methodologies; procedures; contractual forms; business plans; financial records; computer programs; database; or other financial, commercial, business or technical information related to the Company or any Subsidiary or Affiliate unless such information has been previously disclosed to the public by the Company or has become public knowledge other than by a breach of this Agreement; provided, however, that this limitation shall not apply to any such disclosure made while Grantee is employed by the Company, any Subsidiary or Affiliate if such disclosure occurred in connection with the performance of Grantee’s job as an employee of the Company, any Subsidiary or Affiliate;

(ii) Grantee will not, during and for a period of 12 months following Grantee’s termination of

Employment, directly or indirectly induce or attempt to induce any employee to be employed by or to perform services elsewhere;

(iii) Grantee will not, during and for a period of 12 months following Grantee's termination of

Employment, directly or indirectly, induce or attempt to induce any agent or agency, broker, supplier or health care provider of the Company or any Subsidiary to cease or curtail providing services to the Company or any Subsidiary; and

(iv) Grantee will not, during and for a period of 12 months following Grantee’s termination of

Employment, directly or indirectly solicit or attempt to solicit the trade of any individual or entity which, at the time of such solicitation, is a customer of the Company, any Subsidiary or Affiliate, or which the Company, any Subsidiary or Affiliate is undertaking reasonable steps to procure as a customer at the time of or immediately preceding termination of Employment; provided, however, that this limitation shall only apply to any product or service which is in competition with a product or service of the Company, any Subsidiary or Affiliate and shall apply only with respect to a customer or prospective customer with whom the Grantee has been directly or indirectly involved.

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In addition:

(v) Following the termination of Grantee’s Employment, Grantee shall provide assistance to and shall cooperate with the Company or a Subsidiary or Affiliate, upon its reasonable request and without additional compensation, with respect to matters within the scope of Grantee’s duties and responsibilities during Employment, provided that any reasonable out-of-pocket expenses Grantee incurs in connection with any assistance Grantee has been requested to provide under this provision for items including, but not limited to, transportation, meals, lodging and telephone, shall be reimbursed by the Company. The Company agrees and acknowledges that it shall, to the maximum extent possible under the then prevailing circumstances, coordinate, or cause a Subsidiary or Affiliate to coordinate, any such request with Grantee’s other commitments and responsibilities to minimize the degree to which such request interferes with such commitments and responsibilities; and

(vi) Grantee shall promptly notify the Company’s General Counsel if Grantee is contacted by a regulatory

or self-regulatory agency with respect to matters pertaining to the Company or by an attorney or other individual who informs you that he/she has filed, intends to file, or is considering filing a claim or complaint against the Company.

(vii) Grantee acknowledges that all original works of authorship that are created by Grantee (solely or

jointly with others) within the scope of Grantee’s employment which are protectable by copyright are “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C., Section 101). Grantee further acknowledges that while employed by the Company, Grantee may develop ideas, inventions, discoveries, innovations, procedures, methods, know-how or other works which relate to the Company’s current or are reasonably expected to relate to the Company’s future business that may be patentable or subject to trade secret protection. Grantee agrees that all such works of authorship, ideas, inventions, discoveries, innovations, procedures, methods, know-how and other works shall belong exclusively to the Company and the Grantee hereby assigns all right, title, and interest therein to the Company.

To the extent any of the foregoing works may be patentable, Grantee agrees that the Company may file and prosecute any application for patents for such works and that the Grantee will, on request, execute assignments to the Company relating to (and take all such further steps as may be reasonably necessary to perfect the Company’s sole and exclusive ownership of) any such application and any patents resulting therefrom.

(b) If any provision of Article VI (a) is determined by a court of competent jurisdiction not to be enforceable in

the manner set forth herein, the Company and Grantee agree that it is the intention of the parties that such provision should be enforceable to the maximum extent possible under applicable law and that such court shall reform such provision to make it enforceable in accordance with the intent of the parties.

(c) Grantee acknowledges that a material part of the inducement for the Company to grant the Restricted Stock

is Grantee’s covenants set forth in Article VI (a) and that the covenants and obligations of Grantee with respect to nondisclosure, non-solicitation and cooperation relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants and obligations will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Grantee agrees that, if Grantee shall breach any of those covenants or obligations, Grantee shall not be entitled to vest in the Restricted Stock or be entitled to retain any income therefrom and the Company shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) restraining Grantee from committing any violation of the covenants and obligations contained in Article VI. The remedies in the preceding sentence are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity as a court or arbitrator shall reasonably determine.

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(d) Employment Dispute Arbitration Program - Mandatory Binding Arbitration of Employment Disputes.

(i) Except as otherwise specified in this Agreement, the Grantee and the Company agree that all employment-related legal disputes between them will be submitted to and resolved by binding arbitration, and neither the Grantee nor the Company will file or participate as an individual party or member of a class in a lawsuit in any court against the other with respect to such matters. This shall apply to claims brought on or after the date the Grantee accepts this Agreement, even if the facts and circumstances relating to the claim occurred prior to that date and regardless of whether the Grantee or the Company previously filed a complaint/charge with a government agency concerning the claim.

For purposes of Article VI (d) of this Agreement, “the Company” includes Aetna Inc., its subsidiaries and related companies, their predecessors, successors and assigns, and those acting as representatives or agents of those entities. THE GRANTEE UNDERSTANDS THAT, WITH RESPECT TO CLAIMS SUBJECT TO THE ARBITRATION REQUIREMENT, ARBITRATION REPLACES THE RIGHT OF THE GRANTEE AND THE COMPANY TO SUE OR PARTICIPATE IN A LAWSUIT. THE GRANTEE ALSO UNDERSTANDS THAT IN ARBITRATION, A DISPUTE IS RESOLVED BY AN ARBITRATOR INSTEAD OF A JUDGE OR JURY, AND THE DECISION OF THE ARBITRATOR IS FINAL AND BINDING.

(ii) THE GRANTEE UNDERSTANDS THAT THE ARBITRATION PROVISIONS OF THIS AGREEMENT AFFECT THE LEGAL RIGHTS OF THE GRANTEE AND THE COMPANY AND ACKNOWLEDGES THAT THE GRANTEE HAS BEEN ADVISED TO, AND HAS BEEN GIVEN THE OPPORTUNITY TO, OBTAIN LEGAL ADVICE BEFORE SIGNING THIS AGREEMENT.

(iii) Article VI (d) of this Agreement does not apply to workers’ compensation claims, unemployment

compensation claims, and claims under the Employee Retirement Income Security Act of 1974 (“ERISA”) for employee benefits. A dispute as to whether Article VI (d) of this Agreement applies must be submitted to the binding arbitration process set forth in this Agreement.

(iv) The Grantee and/or the Company may seek emergency or temporary injunctive relief from a court

(including with respect to claims arising out of Article VI (a) in accordance with applicable law). However, except as provided in Article VI (c) of this Agreement, after the court has issued a ruling concerning the emergency or temporary injunctive relief, the Grantee and the Company shall be required to submit the dispute to binding arbitration pursuant to this Agreement.

(v) Unless otherwise agreed, the arbitration will be administered by the American Arbitration Association

(the “AAA”) and will be conducted pursuant to the AAA’s National Rules for Resolution of Employment Disputes (the “Rules”), as modified in this Agreement, in effect at the time the request for arbitration is filed. The AAA’s Rules are available on the AAA’s website at www.adr.org. THE GRANTEE ACKNOWLEDGES THAT THE COMPANY HAS ENCOURAGED THE GRANTEE TO READ THESE RULES PROMPTLY AND CAREFULLY AND THAT THE GRANTEE HAS BEEN AFFORDED SUFFICIENT OPPORTUNITY TO DO SO.

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(vi) If the Company initiates a request for arbitration, the Company will pay all of the administrative fees

and costs charged by the AAA, including the arbitrator’s compensation and charges for hearing room rentals, etc. If the Grantee initiates a request for arbitration or submits a counterclaim to the Company’s request for arbitration, the Grantee shall be required to contribute One Hundred Dollars ($100.00) to those administrative fees and costs, payable to the AAA at the time the Grantee's request for arbitration or counterclaim is submitted. The Company may increase the contribution amount in the future without amending this Agreement, but not to exceed the maximum permitted under the AAA rules then in effect. In all cases, the Grantee and the Company shall be responsible for payment of any fees assessed by the arbitrator as a result of that party’s delay, request for postponement, failure to comply with the arbitrator’s rulings and for other similar reasons.

(vii) The Grantee and the Company may choose to be represented by legal counsel in the arbitration

process and shall be responsible for their own legal fees, expenses and costs. However, the arbitrator shall have the same authority as a court to order the Grantee or the Company to pay some or all of the other’s legal fees, expenses and costs, in accordance with applicable law.

(viii) Unless otherwise agreed, there shall be a single arbitrator, selected by the Grantee and the Company

from a list of qualified neutrals furnished by the AAA. If the Grantee and the Company cannot agree on an arbitrator, one will be selected by the AAA.

(ix) Unless otherwise agreed, the arbitration hearing will take place in the city where the Grantee works or

last worked for the Company. If the Grantee and the Company disagree as to the proper locale, the AAA will decide.

(x) The Grantee and the Company shall be entitled to conduct limited pre-hearing discovery. Each may

take the deposition of one person and anyone designated by the other as an expert witness. The party taking the deposition shall be responsible for all associated costs, such as the cost of a court reporter and the cost of an original transcript. Each party also has the right to submit one set of ten written questions (including subparts) to the other party, which must be answered under oath, and to request and obtain all documents on which the other party relies in support of its answers to the written questions. Additional discovery may be permitted by the arbitrator upon a showing that it is necessary for that party to have a fair opportunity to present a claim or defense.

(xi) The arbitrator shall apply the same substantive law that would apply if the matter were heard by a

court and shall have the authority to order the same remedies (but no others) as would be available in a court proceeding. The time limits for requesting arbitration or submitting a counterclaim and the administrative prerequisites for filing an arbitration claim or counterclaim are the same as they would be in a court proceeding. The arbitrator shall have the authority to consider and decide dispositive motions (motions seeking a decision on some or all of the claims or counterclaims without an arbitration hearing).

(xii) All proceedings, including the arbitration hearing and decision, are private and confidential, unless

otherwise required by law. Arbitration decisions may not be published or publicized without the consent of both the Grantee and the Company.

(xiii) Unless otherwise agreed, the arbitrator’s decision will be in writing with a brief summary of the

arbitrator’s opinion. (xiv) The arbitrator’s decision is final and binding on the Grantee and the Company. After the arbitrator’s

decision is issued, the Grantee or the Company may obtain an order of judgment from a court and may obtain a court order enforcing the decision. The arbitrator’s decision may be appealed to the courts only under the limited circumstances provided by law.

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(xv) If the Grantee previously signed an agreement, including but not limited to an employment agreement, containing arbitration provisions, those provisions are superseded by the arbitration provisions of this Agreement.

(xvi) If any provision of Article VI (d) is found to be void or otherwise unenforceable, in whole or in part,

this shall not affect the validity of the remainder of Article VI (d) and the remainder of the Agreement. All other provisions shall remain in full force and effect.

For purposes of this Article VI, the term “Employment” shall refer to active employment with the Company, any Subsidiary or Affiliate, and shall not include severance periods.

ARTICLE VII

OTHER TERMS (a) Nothing in this Agreement shall interfere with or limit in any way the right of the Company or any

Subsidiary or Affiliate to terminate the Grantee’s employment at any time. Neither the execution and delivery hereof nor the granting of the Award shall constitute or be evidence of any agreement or understanding, express or implied, on the part of the Company or any of its Subsidiaries to employ or continue the employment of the Grantee for any period.

(b) Until the Restricted Stock Units have become vested, Grantee shall not have any rights as a stockholder

(including the right to payment of dividends) by virtue of this grant of Restricted Stock Units. (c) During the Restricted Period, the Restricted Stock Units shall be nontransferable and non-assignable

except by will or the laws of descent and distribution. (d) The award, when vested, will be settled on a net basis. Prior to issuing any Common Shares, the Company

will withhold an amount sufficient to satisfy federal, state, local, social security and medicare withholding tax requirements relating to award. Any social security calculation or other adjustments discovered after net share payment will be settled in cash in the Grantee’s pay stub, not in Shares of Common Stock. Vesting will result in taxable compensation reportable on the Grantee’s W-2 in year of vesting.

(e) This Restricted Stock Unit is an unfunded obligation of the Company and nothing in this Agreement shall be construed to create any claim against particular assets or require the Company to segregate or otherwise set aside any assets or create any fund to meet its obligations hereunder.

(f) Anything herein to the contrary notwithstanding, a Grantees whose Restricted Stock Units have been

forfeited as a result of termination of employment due to U.S. Military Service and who is later re-employed (in a full-time active status) after discharge within the time period set in 38 U.S.C Section 4312 will be eligible to have the forfeited Restricted Stock Units reinstated pursuant to procedures established by the Company for this purpose.

(g) If any provision of this Agreement would cause Grantee to incur any additional tax or interest under

Section 409A of the Internal Revenue Code, the Company may reform such provision to comply with Section 409A of the Internal Revenue Code.

(h) If the Company reasonably anticipates that the Company’s tax deduction with respect to the payment upon

vesting of the Restricted Stock Units would be limited or eliminated by application of Section 162(m) of the Internal Revenue Code, the payment of such Restricted Stock Units shall be delayed to the earliest date in which the Company anticipates that its tax deduction for such payment will not be limited or eliminated.

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(i) This Agreement is subject to the 2000 Stock Incentive Plan heretofore adopted by the Company and approved by its shareholders. The terms and provisions of the Plan (including any subsequent amendments thereto) are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

(j) Voluntary Deferral. At such times and upon such terms and conditions as the Company shall determine,

the Company may permit eligible Grantees to elect to defer the distribution of an Award otherwise payable to the Grantee under this Agreement until termination of the Grantee’s Employment or such other date Company shall permit.

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Exhibit 10.3

AETNA PERFORMANCE UNIT AWARD AGREEMENT AETNA PERFORMANCE UNIT AWARD AGREEMENT, dated as of __________ between AETNA INC., a Pennsylvania corporation (the "Company"), and _______________ (the "Executive") pursuant to the Company's 2000 Stock Incentive Plan (the "Plan"). 1. Confirmation of Grant. The Company hereby evidences and confirms its grant to the Executive, effective as of the date hereof, of an award of ___ Performance Units which represent the Company's obligation, subject to the satisfaction of the conditions as to vesting set forth in Section 2 below, to pay cash upon the terms and conditions set forth herein (the “Award”). Each unit represents a potential future payment to the Executive of $___ (before taking into account federal, state or local taxes). The Award may be settled in cash or stock at the discretion of the Committee. This Agreement is subject in all respects to the terms of the Plan, which is incorporated into this Agreement and made a part hereof. Terms used in this Agreement with initial capital letters, but not defined herein, shall have the same meanings as they have under the Plan. 2. Vesting. (a) At the End of the Performance Period. The Performance Units awarded hereby will become vested only to the extent that the Committee determines that the performance goals established by the Committee for the performance period ________ through ____________ (the “Performance Goals” and “Performance Period”, respectively) have been achieved. The Performance Goals and related vesting schedule are set forth on Exhibit A to this Agreement which is incorporated into this Agreement and is made a part hereof. (b) Acceleration of Vesting and Payout of Performance Units Upon a Change in Control. Notwithstanding any other provision of this Agreement to the contrary, if a Change in Control (as defined below) shall occur, the Performance Units not previously forfeited pursuant to this Agreement shall become immediately vested at a level which equals the greater of (x) 100% vesting or (y) the number of Performance Units that would have vested based on the Company’s actual performance level using the date on which the Change in Control occurs as the end of the Performance Period. The Executive shall be paid as soon as is practicable, but in no event later than fifteen business days following the Change in Control, the value of the Performance Units, without regard to any prior deferral election in effect and without regard to Section 3(a) hereof. The term “Change in Control” means the happening of any of the following: (i) When any “person” as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as

amended (the “Exchange Act”) and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act but excluding the Company and any Subsidiary thereof and any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 20 percent or more of the combined voting power of the Company’s then outstanding securities;

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(ii) When, during any period of 24 consecutive months, the individuals who, at the beginning of

such period, constitute the Board (the “Incumbent Directors”) cease for any reason other than death to constitute at least a majority thereof, provided that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this Paragraph 2(b)(ii); or

(iii) The occurrence of a transaction requiring stockholder approval for the acquisition of the

Company by an entity other than the Company or a Subsidiary through purchase of assets, or by merger, or otherwise.

Notwithstanding the foregoing, in no event shall a “Change in Control” be deemed to have occurred (i) as

a result of the formation of a Holding Company, or (ii) with respect to Executive, if Executive is part of a “group,” within the meaning of Section 13(d)(3) of the Exchange Act as in effect on the effective date, which consummates the Change in Control transaction. In addition, for purposes of the definition of “Change in Control” a person engaged in business as an underwriter of securities shall not be deemed to be the “Beneficial Owner” of, or to “beneficially own,” any securities acquired through such person’s participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition.

For purposes of this Section 2(b) the term “Holding Company” means an entity that becomes a holding company for the Company or its businesses as a part of any reorganization, merger, consolidation or other transaction, provided that the outstanding shares of common stock of such entity and the combined voting power of the then outstanding voting securities of such entity entitled to vote generally in the election of directors is, immediately after such reorganization, merger, consolidation or other transaction, beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the voting stock outstanding immediately prior to such reorganization, merger, consolidation or other transaction in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or other transaction, of such outstanding voting stock.

3. Deferral of Distributions. (a) Mandatory Deferral. If the Committee determines that Section 162(m) of the Code would preclude the Company (and, as applicable, a Subsidiary or Affiliate) from receiving a Federal income tax deduction upon a distribution of an Award, the Committee shall have the authority to defer the timing of any such distribution in accordance with this Section 3. If the Committee determines that any such distribution should be deferred, it shall be deferred until the earliest date or dates at which the Award may be distributed without presenting a material risk that Section 162(m) of the Code would preclude the receipt of a Federal income tax deduction with respect to the Award distributed. To the extent any portion (but not all) of the Award whose distribution is deferred hereunder can be distributed in a given year under the standard set forth in the preceding sentence, such portion shall be so distributed. Notwithstanding anything else contained herein to the contrary, the Award which the Executive is entitled to receive in accordance with the terms of this Agreement (absent application of this Section 3(a)) shall be distributed to the Executive as soon as practicable after the first business day of the calendar year following the termination of the Executive's employment with the Company and each of its Subsidiaries and Affiliates.

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(b) Voluntary Deferral. At such times and upon such terms and conditions as the Company shall determine, the Company may permit the Executive to elect to defer the distribution of an Award otherwise payable to the Executive under this Agreement until termination of the Executive's Employment or such other date as the Executive shall specify in the deferral election. (c) Earnings on Deferral. If any payment is deferred pursuant to this Section 3, such amount shall be placed in a bookkeeping account and the value of the account shall be determined during such deferral period according to a formula to be determined from time to time by the Company. 4. Termination of Employment. (a) Special Termination. In the event that the Executive's Employment with the Company and each of its Subsidiaries and Affiliates terminates by reason of the Executive's death, Disability or Retirement or involuntary termination of Employment by the Company for reasons other than misconduct (including violation of the Company’s Code of Conduct) (each a “Special Termination”), then the Performance Units awarded hereunder shall become vested and nonforfeitable, if at all, after the date of termination of Employment and at the end of the Performance Period, as the case may be, as to that number of Units which is equal to that percentage, if any, of such number of Performance Units that would have become vested under Section 2 at the end of the Performance Period, times a fraction as follows: the numerator is the number of days occurring on or after ______________ and the denominator is ___. Notwithstanding anything in this Section 4(a) to the contrary, if following the Exec-utive's termination of Employment, the Committee determines that the Executive has engaged in conduct, whether before or after the Executive's termination of Employment, that would have constituted grounds to terminate employment for Cause had the Executive still been employed at the time of such determination, all of the Executive's Performance Units shall be forfeited as of the date of such determination. (b) Other Termination of Employment. Unless the Committee shall otherwise determine, in the event that the Executive's Employment with the Company and each of its Subsidiaries and Affiliates terminates for any reason other than a Special Termination, any portion of the Performance Units that has not become vested pursuant to Section 2 at the date of the Executive's termination of Employment shall be forfeited as of the date of such termination of Employment. For purposes of this Section 4, the term “Employment” shall refer to active employment with the Company and shall not include severance or salary continuation periods or any other approved leaves of absence and the term “Retirement” shall mean termination of Employment by Executive provided the Executive’s age and completed years of service total 65 or more points at such termination. 5. Capital Adjustments. In the event that the Committee shall determine that any Fundamental Corporate Event affects the Common Stock or the Performance Goals such that an adjustment is required to preserve, or to prevent enlargement of, the benefits or potential benefits made available under this Agreement, then the Committee may make an adjustment in the Performance Goals, in such manner as the Committee may deem equitable.

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6. Amendments. The Committee shall have the right, in its sole discretion, to alter or amend this Agreement, from time to time, as provided in the Plan, provided that no such amendment shall reduce the Executive's rights under this Agreement without the Executive's consent. Notwithstanding, this limitation on amendments is not intended to reduce the Committee’s authority to construe, interpret and administer the Plan and this Award or to establish or modify the Performance Goals or determine whether the Performance Goals have been met. Subject to the first sentence of this Section 6, any alteration or amendment of this Agreement by the Committee shall, upon adoption thereof by the Committee, become and be binding and conclusive on all persons affected thereby without requirement for consent or other action with respect thereto by any such person. The Company shall give written notice to the Executive of any such alteration or amendment of this Agreement as promptly as practicable after the adoption thereof. This Agreement may also be amended by a written agreement signed by both the Company and the Executive. 7. Additional Consideration for Grant. (a) Nondisclosure, Nonsolicitation, Cooperation and Intellectual Property. As consideration for the grant of Performance Units evidenced hereby, without the prior written consent of the Company: (i) the Executive shall not (except to the extent required by an order of a court having competent

jurisdiction or under subpoena from an appropriate government agency) disclose to any third person, whether during or subsequent to the Executive's Employment, any trade secrets, confidential information or proprietary materials, which may include but are not limited to, the following categories of information and materials: customer lists and identities, employee lists and identities, provider lists, product development and related information, marketing plans and related information, sales plans and related information, premium or any other pricing information, operating policies and manuals, research, payment rates, methodologies, contractual forms, business plans, financial records, computer programs and databases or other financial, commercial, business or technical information related to the Company or any Subsidiary or Affiliate unless such information has been previously disclosed to the public by the Company or has become public knowledge other than by a breach of this Agreement; provided, however, that this limitation shall not apply to any such disclosure made while the Executive is employed by the Company, any Subsidiary or Affiliate if such disclosure occurred in connection with the performance of Executive's job as an employee of the Company, any Subsidiary or Affiliate;

(ii) while in Employment and for two years after the termination of such Employment, the

Executive shall not, directly or indirectly, induce or attempt to induce any employee of the Company, any Subsidiary or any Affiliate to be employed or perform services elsewhere;

(iii) while in Employment and for two years after the termination of such Employment, the

Executive shall not, directly or indirectly, induce or attempt to induce any agent or agency, broker, supplier or health care provider of the Company, any Subsidiary or Affiliate to cease or curtail providing services to the Company, any Subsidiary or Affiliate;

(iv) while in Employment and for two years after the termination of such Employment, the

Executive shall not directly or indirectly, solicit or attempt to solicit the trade of any individual or entity which, at the time of such solicitation, is a customer of the Company, any Subsidiary or Affiliate, or which the Company, any Subsidiary or Affiliate is undertaking reasonable steps to procure as a customer at the time of or immediately preceding termination of Employment; provided, however, that this limitation shall only apply to any product or service which is in competition with a product or service of the Company, any Subsidiary or Affiliate and shall apply only with respect to a customer with whom the Executive has been directly or indirectly involved;

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(v) following the termination of the Executive's Employment, the Executive shall provide

assistance to and shall cooperate with the Company or a Subsidiary or Affiliate, upon its reasonable request and without additional compensation, with respect to matters within the scope of the Executive's duties and responsibilities during Employment, provided that any reasonable out-of-pocket expenses incurred in connection with any assistance Executive has been requested to provide under this provision for items including, but not limited to transportation, meals, lodging and telephone, shall be reimbursed by the Company. The Company agrees and acknowledges that it shall, to the maximum extent possible under the then prevailing circumstances, coordinate or cause a Subsidiary or Affiliate to coordinate any such request with the Executive's other commitments and responsibilities to minimize the degree to which such request interferes with such commitments and responsibilities.

(vi) Executive will promptly notify Company’s General Counsel if Executive is contacted by

regulatory or self-regulatory agency with respect to matters pertaining to the Company or by an attorney or other individual who informs Executive that he/she has filed, intends to file, or is considering filing a claim or complaint against the Company.

(vii) Executive acknowledges that all original works of authorship that are created by Executive

(solely or jointly with others) within the scope of Executive’s employment which are protectable by copyright are “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C., Section 101). Executive further acknowledges that while employed by the Company, Executive may develop ideas, inventions, discoveries, innovations, procedures, methods, know-how or other works which relate to the Company’s current or are reasonably expected to relate to the Company’s future business that may be patentable or subject to trade secret protection. Executive agrees that all such works of authoriship, ideas, inventions, discoveries, innovations, procedures, methods, know-how and other works shall belong exclusively to the Company and Executive hereby assigns all right, title and interest therein to the Company. To the extent any of the foregoing works may be patentable, Executive agrees that the Company may file and prosecute any application for patents for such works and that Executive will, on request, execute assignments to the Company relating to (and take all such further steps as may be reasonably necessary to perfect the Company’s sole and exclusive ownership of) any such application and any patents resulting therefrom.

(b) Intention of the Parties. If any provision of Section 7(a) is determined by a court of competent jurisdiction not to be enforceable in the manner set forth in this Agreement, the Company and the Executive agree that it is the intention of the parties that such provision should be enforceable to the maximum extent possible under applicable law and that such court shall reform such provision to make it enforceable in accordance with the intent of the parties. The Company does not intend to enforce the restrictions of Section 7(a) to the extent (i) such enforcement would violate applicable law or (ii) the restrictions are invalid or void under applicable law. The Executive acknowledges that a material part of the inducement for the Company to grant the Performance Units evidenced hereby is the Executive's covenants set forth in Section 7(a) and that the covenants and obligations of the Executive with respect to nondisclosure, nonsolicitation, cooperation and intellectual property rights relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants and obligations will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, the Executive agrees that, if the Executive shall breach any of those covenants, the Company shall have no further obligation to pay the Executive any benefits otherwise payable hereunder. Notwithstanding Section 7(c) of this Agreement, the Company shall be entitled to temporary, preliminary and permanent equitable relief (without the requirement to post bond) restraining the Executive from committing any violation of the covenants and obligations contained in Section 7(a). The remedies in the preceding sentence are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity as a court or arbitrator shall reasonably determine.

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(c) Mandatory Binding Arbitration of Employment Disputes.

(i) Except as otherwise specified in this Agreement, the Executive and the Company agree that all employment-related legal disputes between them will be submitted to and resolved by binding arbitration, and neither the Executive nor the Company will file or participate as an individual party or member of a class in a lawsuit in any court against the other with respect to such matters. This shall apply to claims brought on or after the date the Executive signs this Agreement, even if the facts and circumstances relating to the claim occurred prior to that date.

For purposes of Section 7(c) of this Agreement, “the Company” includes Aetna Inc., its

subsidiaries and related companies, their predecessors, successors and assigns, and those acting as representatives or agents of those entities. THE EXECUTIVE UNDERSTANDS THAT, WITH RESPECT TO CLAIMS SUBJECT TO THE ARBITRATION REQUIREMENT, ARBITRATION REPLACES THE RIGHT OF THE EXECUTIVE AND THE COMPANY TO SUE OR PARTICIPATE IN A LAWSUIT. THE EXECUTIVE ALSO UNDERSTANDS THAT IN ARBITRATION, A DISPUTE IS RESOLVED BY AN ARBITRATOR INSTEAD OF A JUDGE OR JURY, AND THE DECISION OF THE ARBITRATOR IS FINAL AND BINDING.

(ii) THE EXECUTIVE UNDERSTANDS THAT THE ARBITRATION PROVISIONS OF

THIS AGREEMENT AFFECT THE LEGAL RIGHTS OF THE EXECUTIVE AND THE COMPANY AND ACKNOWLEDGES THAT THE EXECUTIVE HAS BEEN ADVISED TO, AND HAS BEEN GIVEN THE OPPORTUNITY TO, OBTAIN LEGAL ADVICE BEFORE SIGNING THIS AGREEMENT.

(iii) Section 7(c) of this Agreement does not apply to workers’ compensation claims, unemployment compensation claims, and claims under the Employee Retirement Income Security Act of 1974 (“ERISA”) for employee benefits. A dispute as to whether Section 7(c) of this Agreement applies must be submitted to the binding arbitration process set forth in this Agreement.

(iv) The Executive and/or the Company may seek emergency or temporary injunctive relief

from a court (including with respect to claims arising out of Section 7(a)) in accordance with applicable law. However, except as provided in Section 7(b) of this Agreement, after the court has issued a ruling concerning the emergency or temporary injunctive relief, the Executive and the Company shall be required to submit the dispute to binding arbitration pursuant to this Agreement.

(v) Unless otherwise agreed, the arbitration will be administered by the American Arbitration

Association (the “AAA”) and will be conducted pursuant to the AAA’s National Rules for Dispute Resolution (the “Rules”), as modified in this Agreement, in effect at the time the request for arbitration is filed. The AAA’s Rules are available on the AAA’s website at www.adr.org. They may also be obtained from the Company’s Office of Employment Dispute Resolution (860-273-4410 or 1-888-291-1444). THE EXECUTIVE ACKNOWLEDGES THAT THE COMPANY HAS ENCOURAGED THE EXECUTIVE TO READ THESE RULES PROMPTLY AND CAREFULLY AND THAT THE EXECUTIVE HAS BEEN AFFORDED SUFFICIENT OPPORTUNITY TO DO SO.

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(vi) If the Company initiates a request for arbitration, the Company will pay all of the

administrative fees and costs charged by the AAA, including the arbitrator’s compensation and charges for hearing room rentals, etc. If the Executive initiates a request for arbitration or submits a counterclaim to the Company’s request for arbitration, the Executive shall be required to contribute One Hundred Dollars ($100.00) to those administrative fees and costs, payable to the AAA at the time the Executive’s request for arbitration or counterclaim is submitted. The Company may increase the contribution amount in the future without amending this Agreement, but not to exceed the amount of the then-current fee for filing a lawsuit in federal court. In all cases, the Executive and the Company shall be responsible for payment of any fees assessed by the arbitrator as a result of that party’s delay, request for postponement, failure to comply with the arbitrator’s rulings and for other similar reasons.

(vii) The Executive and the Company may choose to be represented by legal counsel in the

arbitration process and shall be responsible for their own legal fees, expenses and costs. However, the arbitrator shall have the same authority as a court to order the Executive or the Company to pay some or all of the other’s legal fees, expenses and costs, in accordance with applicable law.

(viii) Unless otherwise agreed, there shall be a single arbitrator, selected by the Executive and

the Company from a list of qualified neutrals furnished by the AAA. If the Executive and the Company cannot agree on an arbitrator, one will be selected by the AAA.

(ix) Unless otherwise agreed, the arbitration hearing will take place the city where the

Executive works or last worked for the Company. If the Executive and the Company disagree as to the proper locale, the AAA will decide.

(x) The Executive and the Company shall be entitled to conduct limited pre-hearing

discovery. Each may take the deposition of one person and anyone designated by the other as an expert witness. The party taking the deposition shall be responsible for all associated costs, such as the cost of a court reporter and the cost of an original transcript. Each party also has the right to submit one set of ten written questions (including subparts) to the other party, which must be answered under oath, and to request and obtain all documents on which the other party relies in support of its answers to the written questions. Additional discovery may be permitted by the arbitrator upon a showing that it is necessary for that party to have a fair opportunity to present a claim or defense.

(xi) The arbitrator shall apply the same substantive law that would apply if the matter were

heard by a court and shall have the authority to order the same remedies (but no others) as would be available in a court proceeding. The time limits for requesting arbitration or submitting a counterclaim are the same as they would be in a court proceeding. The arbitrator shall have the authority to consider and decide dispositive motions (motions seeking a decision on some or all of the claims or counterclaims without an arbitration hearing).

(xii) All proceedings, including the arbitration hearing and decision, are private and

confidential, unless otherwise required by law. Arbitration decisions may not be published or publicized without the consent of both the Executive and the Company.

(xiii) Unless otherwise agreed, the arbitrator’s decision will be in writing with a brief summary

of the arbitrator’s opinion.

(xiv) The arbitrator’s decision is final and binding on the Executive and the Company. After the arbitrator’s decision is issued, the Executive or the Company may obtain an order of judgment from a court and may obtain a court order enforcing the decision. The arbitrator’s decision may be appealed to the courts only under the limited circumstances provided by law.

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(xv) If the Executive previously signed an agreement, including but not limited to an employment agreement, containing arbitration provisions, those provisions are superseded by the arbitration provisions of this Agreement.

(xvi) If any provision of Section 7(c) is found to be void or otherwise unenforceable, in whole

or in part, this shall not affect the validity of the remainder of Section 7(c) and the remainder of the Agreement. All other provisions shall remain in full force and effect.

8. Performance Units Nontransferable. The Performance Units conveyed hereby are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including without limitation by gift, operation of law or otherwise) other than by will or by the laws of descent and distribution to the estate of the Executive upon Executive's death. 9. Tax Withholding. The Company shall have the power to withhold, or require the Executive to remit to the Company, an amount sufficient to satisfy Federal, state, and local withholding tax requirements relating to the vesting of any award, and the Company may defer payment of cash until such requirements are satisfied. 10. No Guarantee of Employment. Nothing in this Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary or Affiliate to terminate the Executive's employment at any time, or confer upon the Executive any right to continue in the employ of the Company or any Subsidiary or Affiliate. 11. Interpretation; Construction. Any determination or interpretation by the Committee under or pursuant to this Agreement shall be final and conclusive on all persons affected hereby. In the event of a conflict between any term of this Agreement and the terms of the Plan, the terms of the Plan shall control. 12. Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. 13. Miscellaneous. (a) Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered personally or sent by certified mail, return receipt requested, postage prepaid, or by any recognized international equivalent of such mail delivery, to the Company or the Executive, as the case may be, at the following addresses or to such other address as the Company or the Executive, as the case may be, shall specify by notice to the other party: (i) if to the Company, to: Aetna Inc. 151 Farmington Avenue Hartford, Connecticut 06156 Attention: Corporate Secretary (ii) if to the Executive, to the address shown on the last page of this Agreement. All such notices and communications shall be deemed to have been received on the date of delivery or on the third business day after the mailing thereof.

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(b) Waiver. Either party hereto may by written notice to the other (i) extend the time for the performance of any of the obligations or other actions of the other under this Agreement, (ii) waive compliance with any of the conditions or covenants of the other contained in this Agreement and (iii) waive or modify performance of any of the obligations of the other under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such party's rights or privileges hereunder or shall be deemed a waiver of such party's rights to exercise the same at any subsequent time or times hereunder. (c) Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut, regardless of the laws that might be applied under principles of conflict of laws. (d) Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. (e) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

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IN WITNESS WHEREOF, the Company and the Executive have agreed to be bound by their respective duties, obligations and covenants (including, without limitation, those covenants agreed to by the Executive contained in Section 7) set forth above and have duly executed this Agreement as of the date first above written. AETNA INC.

By: ____________________ Its Chairman

The Executive may revoke acceptance of this Agreement by notifying in writing Executive Compensation Client Services, Aetna Human Resources, not more than seven (7) days after signing and returning this Agreement. Accepted: ______________________________ Date: _______________ (Signature) Name: _________________________________ Aetna Number: __________________________

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Exhibit A to Aetna Performance Unit Award Agreement

Performance Goal The number of Performance Units that will vest, if any, at the end of the Performance Period (_________ through ____________) is dependent on the degree to which Aetna performs relative to targets on two internal financial measures:

[Performance Goal to be added]

Vesting Schedule Vesting between established percents is linear (e.g., 110% of target results in 110% vesting).

[Vesting Schedule to be added]

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Exhibit 10.4

AETNA INC.

NON-EMPLOYEE DIRECTOR COMPENSATION PLAN

RESTRICTED STOCK UNIT AGREEMENT Pursuant to its Non-Employee Director Compensation Plan (the "Plan"), Aetna Inc. (the "Company") hereby grants to the person named below the stated number of Restricted Stock Units on the terms and conditions hereinafter set forth. All capitalized terms used herein which are not otherwise defined herein shall have the meaning specified in the Plan.

Effective Date

Grantee

Number of Shares of Restricted Stock Units

Installment Shares Vesting Date

1 2 3

ARTICLE I

DEFINITIONS

(a) "Change in Control" means the happening of any of the following: (i) When any "person" as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as

amended (the "Exchange Act") and as used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the Exchange Act but excluding the Company and any Subsidiary thereof and any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities;

(ii) When, during any period of 24 consecutive months, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof, provided that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this paragraph (ii); or

(iii) The occurrence of a transaction requiring stockholder approval for the acquisition of the Company

by an entity other than the Company or a Subsidiary through purchase of assets, or by merger, or otherwise.

Notwithstanding the foregoing, in no event shall a “Change in Control” be deemed to have

occurred (i) as a result of the formation of a Holding Company, or (ii) with respect to Grantee, if Grantee is part of a “group,” within the meaning of Section 13(d)(3) of the Exchange Act as in effect on the effective date, which consummates the Change in Control transaction. In addition, for purposes of the definition of “Change in Control” a person engaged in business as an underwriter of securities shall not be deemed to be the “Beneficial Owner” of, or to “beneficially own,” any securities acquired through such person’s participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition.

(b) "Common Stock" means shares of the Company's Common Shares, $.01 par value per share. (c) "Effective Date" means the date of grant of this award of Restricted Stock Units as set forth above. (d) "Fair Market Value" means the closing price of the Common Stock as reported by the Consolidated Tape of

the New York Stock Exchange Listed Shares on the date such value is to be determined, or, if no shares were traded on such date, on the next preceding day on which the Common Stock was traded.

(e) "Grantee" means the person named above to whom this award of Restricted Stock has been granted. (f) “Government Service” shall mean the appointment or election of a Director to a position with the Federal,

state or local government or any political subdivision, agency or instrumentality thereof. (g) “Holding Company” means an entity that becomes a holding company for the Company or its businesses as

a part of any reorganization, merger, consolidation or other transaction, provided that the outstanding shares of common stock of such entity and the combined voting power of the then outstanding voting securities of such entity entitled to vote generally in the election of directors is, immediately after such reorganization, merger, consolidation or other transaction, beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the voting stock outstanding immediately prior to such reorganization, merger, consolidation or other transaction in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or other transaction, of such outstanding voting stock.

(h) "Installment" means a portion of this award of Restricted Stock Units as set forth above. (i) “Interest Account” means a bookkeeping account established to record a deferral of Restricted Stock Units. (j) "Restricted Period" means the period during which this award of Restricted Stock Units is not vested. (k) “Retirement” shall mean termination of service as a Director on account of the Company’s mandatory

Director Retirement policy as may be in effect on the date of such termination of service. (l) “Shares of Stock” or “Stock” means the Company’s Common shares, .01 par value per share.

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(m) “Stock Unit Account” - a bookkeeping account established to record a deferral of restricted stock units. (n) "Successor" means the legal representative of the estate of a deceased Grantee or the person or persons who

shall acquire the right to the Restricted Stock by bequest or inheritance or by reason of the death of the Grantee.

(o) "Subsidiary" means an entity of which, at the time such subsidiary status is to be determined, at least 50%

of the total combined voting power of all classes of stock of such entity is held by the Company and/or one or more other subsidiaries.

(p) “Vesting Date” means the date any Installment shall vest in accordance with the terms of this Agreement.

ARTICLE II

RESTRICTED PERIOD

(a) These Restricted Stock Units will vest in Installments on or after the dates set forth above or on such earlier

date as provided in Article IV or V. (b) Once vested, each Installment of such Restricted Stock Units shall be payable in Common Stock. Grantee

may elect to defer the payment of any Restricted Stock Unit provided the Grantee makes such election pursuant to procedures established by the Company from time to time. During the period of deferral, such obligation shall represent an unfunded contractual obligation of the Company to deliver Common Stock. During the period of deferral, the deferred amount will be invested in a Stock Unit Account which tracks the value of the Common Stock. Dividend equivalents shall be credited during the period of deferral or an Interest Account. The Interest Account will credit interest at the same rate and in the manner in which interest is credited under the fixed investment fund under the Company’s 401(k) plan (or any successor thereto).

ARTICLE III

CAPITAL CHANGES In the event that the Board shall determine that any Fundamental Corporate Event affects the Common Stock such that an adjustment is required to preserve, or to prevent enlargement of, the benefits or potential benefits made available under this Plan, then the Board shall, in such manner as the Board may deem equitable, adjust the number and kind of units subject to the award of Restricted Stock Units. Additionally, the Board may make provision for any cash payment to a Grantee or the Successor of the Grantee. However, the number of Restricted Stock Units shall always be a whole number.

ARTICLE IV

CHANGE IN CONTROL

Upon the occurrence of a Change in Control, each Restricted Stock Unit shall become immediately vested.

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ARTICLE V

VESTING AND TERMINATION OF RESTRICTED STOCK UNIT

If Grantee shall cease board service for reason of death, disability or Government Service, any unvested Restricted Stock units will vest and be paid to Grantee as of the date of cessation of board service. If Grantee shall cease board service for reason of Retirement, unvested Restricted Stock Units shall vest immediately and be paid on the vesting dates set forth above. If any installment of this Restricted Stock Unit is not yet vested on or before the Grantee’s termination of board service, such unvested Installment shall be forfeited.

ARTICLE VI

OTHER TERMS (a) Grantee shall not have any rights as a stockholder by virtue of this grant of Restricted Stock Units. (b) During the Restricted Period, the Restricted Stock Units shall be nontransferable and nonassignable except

by will or the laws of descent and distribution or pursuant to a qualified domestic relations order. (c) This Agreement is subject to the Non-Employee Director Compensation Plan heretofore adopted by the

Company and approved by its shareholders. The terms and provisions of the Plan or a successor plan (including any subsequent amendments thereto) are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

IN WITNESS WHEREOF, AETNA INC. has caused this Restricted Stock Agreement to be executed on the Effective Date, and Grantee has accepted the terms and provisions hereof. AETNA INC.

By: _______________________ Its Chairman

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Exhibit 10.5 CONSULTING AGREEMENT

This Consulting Agreement (this “Agreement”) is made as of the 1st day of October, 2006, by and between

Aetna Inc. (“Company”) and John W. Rowe, M.D. (“Consultant”). The parties hereto agree as follows: 1. Engagement. Company hereby engages Consultant and Consultant hereby agrees to render at the

request of the Company’s Chief Executive Officer or Board of Directors, upon reasonable notice, independent consulting services for Company on matters of an executive and/or high level nature, including but not limited to design and analysis of Company’s experience with various products and strategies including consumer-directed health plans, Aexcel networks, Chairman initiatives, Medicare, pharmaceutical programs, wellness programs, and other business matters as agreed by the parties. At the Company’s request, Consultant will collaborate with the Company on presentation and publication of the results of these analyses for use by the Company, internally or externally. In addition, at the Company’s request, Consultant shall serve as a director of the Aetna Foundation, Inc. and continue to participate in specific community activities, including Board-related service, as requested by Company and agreed to by Consultant. In this engagement and all activities hereunder, Consultant shall serve as an independent contractor and not an employee of Company, as further explained in Section 6 below.

2. Term. The term of this Agreement shall begin as of October 1, 2006 and shall terminate on

September 30, 2009, unless terminated earlier or extended pursuant to Section 5 of this Agreement. 3. Compensation. As compensation for all services rendered by Consultant under this Agreement,

Company shall pay Consultant at a per diem rate of $4,000 per day and at $2,000 per half-day for consulting services excluding any community-related efforts or service as a board director of a charitable or not-for-profit entity, subject to the provisions of Section 5 of this Agreement. All such compensation shall be payable without deduction, including no deduction for federal income, social security, or state income taxes. All applicable taxes shall be the responsibility of Consultant. Company also shall pay all travel-related expenses of Consultant for such consulting services including all community-related efforts performed at Company’s and/or Aetna Foundation Inc.’s request. In connection with any consulting assignment hereunder, (i) Consultant shall have full access (on the same basis then applicable to senior executives of the Company) to the Company’s travel facilities (e.g., car, driver, aircraft and helicopter services), (ii) Company shall provide an office with appropriate support services for Consultant at Company’s facilities in either New York or Boston (at Consultant’s election), unless Consultant assumes another professional position that provides office and support services, provided, however, that if Company does not maintain facilities in the city in which Consultant desires to work, it shall provide Consultant facilities at another location in such city, and (iii) Company shall provide Consultant with computers (including upgrades), software, printers, monitors and access to information technology and communications support staff (on the same basis as such items and support are made available to senior executives of the Company) in his office and at his two principal residences.

4. Performance of Duties. Consultant shall render services conscientiously and shall devote his best

efforts and abilities thereto, at such times during the term hereof, and in such manner, as Company and Consultant shall mutually agree, not to exceed 25 full days per calendar quarter, it being acknowledged that Consultant’s services shall be performed at such places and at such times as are reasonably convenient to Consultant, upon reasonable notice. Consultant shall observe all policies and directives promulgated from time to time by Company.

5. Termination. This Agreement will terminate by either party upon reasonable notice to the other.

This Agreement also will terminate on Consultant’s death or, upon Consultant’s acceptance of an academic or government position, upon Consultant’s request. The term of this Agreement may be extended for two additional one-year periods on the same terms and conditions upon mutual agreement of Consultant and Company. Consultant’s obligations under Section 7 (Confidential Information), Section 8 (Return of Confidential Information and Other Company Property), Section 9 (Rights of Authorship), Section 10 (Remedy), Section 11 (Arbitration) and Section 12 (Miscellaneous) shall survive termination hereof.

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6. Independent Contractor. It is expressly agreed that Consultant is acting as an independent contractor in performing services hereunder. Company shall carry no workers’ compensation insurance or any health or accident insurance (other than standard Aetna retiree medical care benefits to which the Consultant is otherwise entitled) to cover Consultant. Company shall not pay any contributions to Social Security, unemployment insurance, federal or state withholding taxes, nor provide any other contributions or benefits that might be expected in an employer-employee relationship. Company shall, however, pay all expenses associated with the arrangement contemplated herein, including but not limited to advice, consulting, negotiation and preparation of documents memorializing such arrangement.

7. Confidential Information. Consultant desires to act as a consultant to Company and he

understands and agrees that his duties for the Company in the past have required, and his consulting duties may require, access to Confidential Information of a competitive nature, which Company makes available only to select persons who have a need to know such confidential information, and/or information subject to the attorney-client and work product privileges. Consultant understands and agrees that for purposes of this Agreement, “Confidential Information” includes all trade secrets and all information furnished by Company to Consultant, or to which Consultant gains access during the course of his or her consulting relationship with Company, which is either non-public, confidential or proprietary in nature, including, but not limited to financial statements, client lists or information, supplier lists or information, subcontractor lists or information, prospect lists or information, information pertaining to Company’s channels of distribution, marketing, work product, pricing policy and records, sales representative commission policy, sales volume by products, customer or geographic area, personnel history, accounting procedures, invoice forms, contracts, leases, business plan, information about the structure and marketing of the Company’s products and policies, revenue and/or commission information, commission percentages, rating discounts and/or client costs, products, inventions, services, pricing, databases, lead generation sources, debt information, employment manuals, employee benefit cards, employee benefit statements, computer systems, software, computer hardware, computer codes, passwords, programs and formula, technology, designs, secret processes, proprietary or technical information, procedures or manuals, trademarks or copyrighted material in use or under consideration for use, together with analyses, proposals, compilations, forecasts, studies, or other documents or work product prepared by Company, its agents, representatives (including attorneys, accountants and financial advisors) or employees which contain or otherwise reflect such information. Consultant will not retain, use or disclose, directly or indirectly, any of Company’s Confidential Information. Consultant recognizes that this Confidential Information is a unique asset of Company, developed and perfected over a considerable time and at substantial expense to Company and the disclosure of which may cause injury, loss of profits and loss of goodwill to Company. Consultant agrees to protect the confidentiality of all Confidential Information during the term of this Agreement and thereafter. Consultant agrees to keep all documents containing or referring to Confidential Information in secure locations and not to duplicate, use or reveal to third parties any Confidential Information except as necessary for the business purposes of Company. Consultant agrees to inform all other persons to whom the Confidential Information might be disclosed or made available of Company’s proprietary interest and of the recipient’s obligations under this Agreement and to take such other protective measures as may be or become reasonably necessary to preserve the confidentiality of such Confidential Information. Notwithstanding the foregoing, however, “Confidential Information” shall not include such information that the Consultant is required by law or a governmental agency to disclose, or information that has come into the public domain by means other than breach of this Agreement.

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8. Return of Confidential Information and Other Company Property. Consultant acknowledges that

all papers, photographs and apparatus related to the business of Company, including those prepared or made by Consultant, including but not limited to the Confidential Information, shall be and remain at all times the property of Company. When the consulting relationship with the Company terminates for any reason, or upon request by Company, Consultant will promptly deliver (within five calendar days) to Company all of Consultant’s files and copies thereof and other property of Company in the Consultant’s possession, including but not limited to any security pass or ID card, pagers, voice mail passwords or passcodes, company credit card, keys, computer disks and software, work product, brochures or customer data, all originals and copies of the Confidential Information and all originals and copies of documents relating to the Confidential Information.

9. Rights of Authorship. Consultant acknowledges that all original works of authorship that are

made by him (solely or jointly with others) within the scope of this Agreement and which are protectable by copyright are “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C., Section 101).

10. Remedy. Consultant understands that Company would not have any adequate remedy at law for

the material breach or threatened breach by the Consultant of Sections 7 (Confidential Information), 8 (Return of Confidential Information and Other Company Property) or 9 (Rights of Authorship) of this Agreement, and agrees that in the event of any such material breach or threatened breach, Company may, in addition to the other remedies which may be available to it, file a suit in equity to enjoin Consultant from the breach or threatened breach of such covenant(s).

11. Arbitration. Any matter, controversy or claim arising out of or relating to this Agreement or to

any breach of this Agreement, except claims set forth in Section 10 of this Agreement, as to which Company has elected to seek a court remedy, shall be settled by arbitration before one arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgments on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Each party shall pay: the fees of his or its attorneys; the expenses of his or its witnesses; and all other expenses connected with presenting his or its case. Other costs of the arbitration, including the cost of any record or transcripts of the arbitration hearing, administrative fees, the fees of the arbitrator, and all other fees and costs shall be borne equally by the parties.

12. Miscellaneous. (a) Notices. Any notice required or permitted to be given under this Agreement shall be

sufficient if in writing and if sent by registered or certified mail to Company or Consultant at the address set forth below to such other address as they shall notify each other in writing. If to Company: Chief Executive Officer Aetna Inc. 151 Farmington Avenue Hartford, CT 06156 With a copy to:

General Counsel Aetna Inc. 151 Farmington Avenue Hartford, CT 06156

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If to Consultant: at Consultant’s last known address as reflected on the books and records of the Company

With a copy to: Pearl Meyer & Partners 445 Park Avenue New York, NY 10022

(b) Assignment. This Agreement shall be binding upon and inure to the benefit of Company and its successors and assigns. This Agreement shall not be assignable by Consultant.

(c) Applicable Law. This Agreement shall be construed in accordance with the laws of the State of Connecticut in every respect, without regard to its rules regarding conflicts of law.

(d) Headings. Section headings and numbers herein are included for convenience of reference only

and this Agreement is not to be construed with reference thereto. If there is any conflict between such numbers and headings and the text hereof, the text shall control.

(e) Severability. If for any reason any portion of this Agreement shall be held invalid or

unenforceable, the parties agree that it is their intent that such provision shall be enforced to the maximum extent possible under applicable law, and that the court or arbitrator shall reform such provision to make it enforceable in accordance with the intent of the parties, and that notwithstanding such invalidity, unenforceability or reformation of any provision, the remaining provisions of this Agreement shall remain in full force and effect.

(f) Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the

subject matter hereof and supersedes all previous agreements between the parties, provided, however, that the parties acknowledge that certain provisions of the Employment Agreement dated as of September 6, 2000, as amended, may remain in effect as provided in such agreement and amendments thereto, during all or a portion of the term of this Agreement. No officer, employee, or representative of Company has any authority to make any representation or promise in connection with this Agreement or the subject matter hereof that is not contained herein, and Consultant represents and warrants that he has not executed this Agreement in reliance upon any such representation or promise. No modification, extension or renewal of this Agreement shall be valid unless made in writing and signed by the parties hereto.

(g) Waiver of Breach. The waiver by Company of a breach of any provision of this Agreement by

Consultant shall not operate or be construed as a waiver of any subsequent breach by Consultant.

(h) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one agreement. AETNA INC.

By: _______________________ Its Chairman

Aetna Inc. John W. Rowe, M.D. By: /s/: Elease E. Wright /s/: John W. Rowe Its: Senior Vice President, Human Resources Date: 9/27/2006 Date: 9/27/06

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Exhibit 12.1

Computation of Ratios The computation of ratio of earnings to fixed charges for the nine months ended September 30, 2006 and the years ended December 31, 2005, 2004, 2003, 2002 and 2001 are as follows:

Nine Months EndedSeptember 30,

(Millions) 2006 2005(1) 2004(1) 2003(1) 2002(1) 2001(1)

Pretax income (loss) from continuing operations 1,923.6$ 2,453.3$ 1,760.0$ 1,378.7$ 495.6$ (395.5)$ (2)

Add back fixed charges 147.7 177.5 165.5 161.1 178.3 218.8 Income (loss), as adjusted 2,071.3$ 2,630.8$ 1,925.5$ 1,539.8$ 673.9$ (176.7)$

Fixed charges:Interest on indebtedness 107.2$ 122.8$ 104.7$ 102.9$ 119.5$ 142.8$ Portion of rents representative of interest factor 40.5 54.7 60.8 58.2 58.8 76.0 Total fixed charges 147.7$ 177.5$ 165.5$ 161.1$ 178.3$ 218.8$

Ratio of earnings to fixed charges 14.02 14.82 11.63 9.56 3.78 (.81) (2)

Years Ended December 31,

(1) Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 Revised, “Share-Based Payment”,

applying the modified-retrospective approach. Accordingly, all prior period financial information was adjusted to reflect our stock-based compensation activity since 1995.

(2) Pretax loss from continuing operations for the year ended December 31, 2001 reflects a severance and facilities charge of $192.5 million. Additional pretax income from continuing operations necessary to achieve a ratio of earnings to fixed charges of 1.0 was approximately $395.5 million.

Exhibit 15.1

October 26, 2006 Aetna Inc. Hartford, Connecticut Re: Registration Statements Nos. 333-52120, 52122, 52124, 54046, 73052, 87722, 87726, 124619, 124620, 130126, 136176, 136177 With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated October 26, 2006 related to our review of interim financial information. Pursuant to Rule 436 under the Securities Act of 1933 (the “Act”), such report is not considered part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared or certified by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act. /s/ KPMG LLP Hartford, Connecticut

Exhibit 31.1

Certification I, Ronald A. Williams, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Aetna Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a

material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report,

fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure

controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to

be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial

reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this

report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that

occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of

internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over

financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting. Date: October 26, 2006 /s/ Ronald A. Williams Ronald A. Williams Chairman, Chief Executive Officer and President

Exhibit 31.2

Certification I, Alan M. Bennett, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Aetna Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a

material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report,

fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure

controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to

be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial

reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this

report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that

occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of

internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over

financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting. Date: October 26, 2006 /s/ Alan M. Bennett Alan M. Bennett Chief Financial Officer

Exhibit 32.1

Certification

The certification set forth below is being submitted to the Securities and Exchange Commission in connection with the Quarterly Report on Form 10-Q of Aetna Inc. for the period ended September 30, 2006 (the “Report”) solely for the purpose of complying with Rule 13a-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code. Ronald A. Williams, the Chairman, Chief Executive Officer and President of Aetna Inc., certifies that, to the best of his knowledge: 1. the Report fully complies with the requirements of Section 13(a) of the Exchange Act; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and

results of operations of Aetna Inc. Date: October 26, 2006 /s/ Ronald A. Williams

Ronald A. Williams Chairman, Chief Executive Officer and President

Exhibit 32.2

Certification

The certification set forth below is being submitted to the Securities and Exchange Commission in connection with the Quarterly Report on Form 10-Q of Aetna Inc. for the period ended September 30, 2006 (the “Report”) solely for the purpose of complying with Rule 13a-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code. Alan M. Bennett, the Chief Financial Officer of Aetna Inc., certifies that, to the best of his knowledge: 1. the Report fully complies with the requirements of Section 13(a) of the Exchange Act; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of

operations of Aetna Inc. Date: October 26, 2006 /s/ Alan M. Bennett Alan M. Bennett Chief Financial Officer