Aetna 2008 Annual Report Download - page 61

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4. Earnings Per Common Share
Basic earnings per share (“EPS”) is computed by dividing income from continuing operations (i.e., the numerator)
by the weighted average number of common shares outstanding (i.e., the denominator) during the period. Diluted
EPS is computed in a manner similar to basic EPS, except that the weighted average number of common shares
outstanding is adjusted for the dilutive effects of stock options, stock appreciation rights and other dilutive financial
instruments, but only in the periods in which such effect is dilutive.
The computations of basic and diluted EPS from continuing operations for 2008, 2007 and 2006 were as follows:
(Millions, except per common share data) 2008 2007 2006
Income from continuing operations 1,384.1$ 1,831.0$ 1,685.6$
Weighted average shares used to compute basic EPS 475.5 509.2 546.2
Dilutive effect of outstanding stock-based compensation awards
(1)
12.8 17.8 22.9
Weighted average shares used to compute diluted EPS 488.3 527.0 569.1
Basic EPS 2.91$ 3.60$ 3.09$
Diluted EPS 2.83$ 3.47$ 2.96$
(1) Approximately 9.7 million and 2.6 million stock appreciation rights (“SARs”) (with exercise prices ranging from $25.94 to $59.76
and $44.22 to $59.76, respectively) were not included in the calculation of diluted EPS for 2008 and 2007, respectively, and
approximately 1.6 million stock options (with exercise prices ranging from $33.38 to $42.35) were not included in the calculation
of diluted EPS for 2008 as their exercise prices were greater than the average market price during the applicable period.
5. Operating Expenses
For 2008, 2007 and 2006, selling expenses (which include broker commissions, the variable component of our
internal sales force compensation and premium taxes) and general and administrative expenses were as follows:
(Millions) 2008 2007 2006
Selling expenses 1,149.6$ 1,060.9$ 952.7$
General and administrative expenses:
Salaries and related benefits 2,619.8 2,343.6 2,305.3
Other general and administrative expenses (1) 1,982.1 1,641.9 1,562.6
Total general and administrative expenses 4,601.9 (2) 3,985.5 3,867.9
Total operating expenses 5,751.5$ 5,046.4$ 4,820.6$
(1) Includes the following charges for 2008: a $42.2 million allowance on a reinsurance recoverable and a $20.0 million contribution
for the establishment of an out-of-network pricing database. Includes the following charges for 2006: a physician class action
settlement insurance-related charge of $72.4 million pretax; a debt refinancing charge of $12.4 million pretax and an acquisition-
related software charge of $8.3 million pretax. Refer to the reconciliation of operating earnings to income from continuing
operations in Note 19 beginning on page 79 for additional information.
(2) In 2008, we recorded a $54.7 million severance and facility charge related to actions taken. This charge is reflected in total general
and administrative expenses. Refer to the reconciliation of operating earnings to income from continuing operations in Note 19
beginning on page 79 for additional information.
Annual Report - Page 56