Aetna Inc. is once again using a health-linked notes program to reduce capital requirements at its group health business.

Aetna, Hartford (NYSE:AET), is getting $150 million in collateralized excess-of-loss reinsurance by getting a 3-year reinsurance agreement from Vitality Re II Ltd., a special purpose vehicle in the Cayman Islands.

Vitality Re II has agreed to pay Aetna $150 million if the medical benefits ratio for the business covered reaches 120% in 2011 or other pre-set levels in 2012 and 2013, according to Aetna.

Vitality Re II is financing the arrangement by selling health-linked notes through a private placement.

Aetna announced a similar arrangement with another Cayman Islands special purpose vehicle, Vitality Re Ltd., in January.

- Allison Bell

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