Aetna 2006 Annual Report Download - page 85

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A reconciliation of operating earnings to income from continuing operations in the Consolidated Statements of
Income in 2006, 2005 and 2004 was as follows:
(Millions) 2006 2005 2004
Operating earnings 1,647.9$ 1,508.8$ 1,078.9$
Net realized capital gains, net of tax 24.1 21.1 45.9
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 1,685.6$ 1,573.3$ 1,124.8$
(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 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 20 beginning on page 84 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 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. 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 in 2006 (refer to Note 18 beginning on page 79).
(3) 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. 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 in 2006 (refer to Notes 13 and 15 beginning on pages 75 and 76, respectively).
(4) 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 ($8.3 million pretax) charge to net income, reflected in general and administrative
expenses in 2006. This charge does not reflect the underlying business performance of Group Insurance.
Revenues from external customers by product in 2006, 2005 and 2004 were as follows:
(Millions) 2006 2005 2004
Health risk 19,153.5$ 16,924.7$ 14,862.8$
Health fees and other revenue 2,743.7 2,385.8 2,051.6
Group life 1,260.4 1,332.2 1,229.8
Group disability 483.3 408.1 342.2
Group long-term care 102.8 95.0 83.5
Large case pensions 205.1 210.8 200.9
Total revenue from external customers
(1)
23,948.8$ 21,356.6$ 18,770.8$
(1) All within the United States, except approximately $4 million, $6 million and $5 million in 2006, 2005 and 2004, respectively,
which were derived from customers in Canada.
The following is a reconciliation of reportable segment revenues to total revenues included in the Consolidated
Statements of Income in 2006, 2005 and 2004:
(Millions) 2006 2005 2004
Revenue from external customers 23,948.8$ 21,356.6$ 18,770.8$
Net investment income 1,164.7 1,103.0 1,062.5
Net realized capital gains 32.2 32.3 70.8
Total revenue 25,145.7$ 22,491.9$ 19,904.1$
Long-lived assets, all within the United States, were $284 million and $273 million at December 31, 2006 and
2005, respectively.
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