Aetna Also Exposed to Lehman, AIG for $234M

Among those fervently hoping that Washington can soon reach agreement on a financial-bailout package have to be large health-insurance companies. Late last week, Aetna became the latest health-insurance giant to disclose that it also has a substantial exposure to securities offered by the failed investment bank Lehman Brothers and the recently bailed-out insurance giant American International Group.

Aetna's exposure, however, appears to be the largest yet disclosed within the industry. The company said that as of Sept. 17, it held $132 million in Lehman debt securities and $102 million in similar securities issued by AIG. As is now standard in these disclosures, Aetna stressed that its overall portfolio -- the cash pile it amasses from policyholder premiums that it also uses to pay out medical benefits -- stood at approximately $12.7 billion on June 30.

The Aetna announcement follows related disclosures by Humana of a possible $62 million loss related to Lehman and a WellPoint writedown of more than $200 million as a result of the nationalization of mortgage-security brokers Fannie Mae and Freddie Mac.

For what it's worth, Aetna says it also holds a "reinsurance recoverable" from a Lehman subsidiary that hasn't been affected by the firm's collapse. As for the other debt securities, Aetna says it is "continuing to assess the recoverability of these investments."

On a rough basis, Aetna's potentially worthless holdings in Lehman and AIG instruments accounted for almost two percent of its entire portfolio. That's not an insignificant amount, and it's also a bigger proportion of its portfolio than any other major insurer has so far disclosed. Humana, for instance, said its Lehman-related holdings accounted for less than a half-percent of its portfolio, and WellPoint's loss in Fannie and Freddie shares made up about 1.5 percent of its $16.4 billion holdings.

Of course, neither Aetna nor its competitors offered any sense of how the financial turmoil of the past weeks have affected their overall holdings, so those percentages could be much higher. While none of these actual and potential losses appear to pose a significant threat to operations, they certainly don't make life any easier for an industry that may well already face an existential threat due to the slow-motion collapse of its business model.