Aetna 2008 Annual Report Download - page 85

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A reconciliation of operating earnings to income from continuing operations in our statements of income in 2008,
2007 and 2006 was as follows:
(Millions) 2008 2007 2006
Operating earnings 1,920.9$ 1,837.1$ 1,647.9$
Net realized capital (losses) gains, net of tax (482.3) (47.9) 24.1
Reduction of reserve for anticipated future losses on discontinued products
(1)
28.5 41.8 75.0
Severance and facility charge
(1)
(35.6) - -
Allowance on reinsurance recoverable
(1)
(27.4) - -
Contribution for the establishment of an out-of-network pricing database
(1)
(20.0) - -
Physician class action settlement insurance-related charge
(1)
- - (47.1)
Debt refinancing charge
(1)
- - (8.1)
Acquisition-related software charge
(1)
- - (6.2)
Income from continuing operations 1,384.1$ 1,831.0$ 1,685.6$
(1) The following other items are excluded from operating earnings because we believe they neither relate to the ordinary course of our
business nor reflect our underlying business performance:
• We reduced the reserve for anticipated future losses on discontinued products by $28.5 million ($43.8 million pretax), $41.8
million ($64.3 million pretax) and $75.0 million ($115.4 million pretax) in 2008, 2007 and 2006, respectively. Refer to Note
20 beginning on page 81 for additional information on the reduction of the reserve for anticipated future losses on
discontinued products.
• In 2008, we recorded a severance and facility charge of $35.6 million ($54.7 million pretax) related to actions taken.
• As a result of the liquidation proceedings of Lehman Re, a subsidiary of Lehman Brothers Holdings Inc., we recorded an
allowance against our reinsurance recoverable from Lehman Re of $27.4 million ($42.2 million pretax) in 2008. This
reinsurance is on a closed book of paid-up group whole life insurance business.
• As a result of our agreement with the New York Attorney General to discontinue the use of Ingenix databases in the future,
we committed to contribute $20.0 million to a non-profit organization to help create a new independent database for
determining out-of-network reimbursement rates.
• As a result of a trial court’ s ruling in 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 2006. Refer to Note 18 beginning on page 76.
• In connection with the issuance of $2.0 billion of our senior notes in 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
2006.
• As a result of the acquisition of Broadspire Disability in 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 ($8.3 million pretax) charge to net income, reflected in general
and administrative expenses in 2006.
Revenues from external customers by product in 2008, 2007 and 2006 were as follows:
(Millions) 2008 2007 2006
Health care premiums 25,507.3$ 21,500.1$ 19,153.5$
Health care fees and other revenue 3,202.6 2,931.3 2,743.7
Group life 1,065.2 1,204.2 1,260.4
Group disability 630.0 577.1 483.3
Group long-term care 86.3 93.8 102.8
Large case pensions 205.2 216.9 205.1
Total revenue from external customers (1) 30,696.6$ 26,523.4$ 23,948.8$
(1) All within the United States, except approximately $145 million, $7 million and $4 million in 2008, 2007 and 2006, respectively,
which were derived from foreign customers.
Annual Report - Page 80