PART II ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations The higher operating expense ratio is driven by strategic investments. Benefits and expenses include the favorable before tax impact of reserve studies of $59 million in 2011 as compared with $55 million in 2010. Global Supplemental Benefits Segment Segment Description Results of Operations management of solicitation spending. Excluding the first quarter 2012 implementation effect of the capital management strategy, the Global Supplemental Benefits segment’s effective tax rate for the full year 2012 was 24.6%, compared with 27.3% for 2011. Global Supplemental Benefits segment earnings increased 15% in 2011 compared with 2010. Segment earnings for 2010 include a $10 million unfavorable tax adjustment related to the first quarter 2010 expansion of a capital management strategy to permanently invest the earnings of its Hong Kong operations overseas (see further discussion in the Liquidity and Capital Resources section of the MD&A). Excluding the impact of this tax adjustment and foreign currency movements (presented in the table above), the Global Global Supplemental Benefits segment earnings increased 46% in 2012 compared to 2011. Segment earnings for 2012 include an after-tax charge of $6 million associated with the realignment and efficiency plan, and an $8 million favorable adjustment related to the first quarter 2012 expansion of a capital management strategy to permanently invest the earnings of its China and Indonesia operations overseas (see further discussion in the Liquidity and Capital Resources section of the MD&A). Excluding these adjustments and the unfavorable impact of foreign currency movements (presented in the table above) adjusted income from operations increased 42% for the 2012 compared with 2011. These increases were primarily driven by the strong revenue growth, primarily in South Korea and, to a lesser extent, margin improvement largely attributable to disciplined 46 CIGNA CORPORATION -  2012 Form  10-K As explained in the Introduction section of this MD&A and Note 23 to the Consolidated Financial Statements, effective December 31, 2012, the Company changed its external reporting segments. Prior year information has been conformed to the new segment structure. The Global Supplemental segment includes supplemental health, life and accident insurance products offered in the U.S. and foreign markets, primarily in Asia as well as Medicare supplemental coverage following the 2012 acquisition of Great American Supplemental Benefits. The key factors for this segment are: Throughout this discussion, the impact of foreign currency movements was calculated by comparing the reported results to what the results would have been had the exchange rates remained constant with the prior year’s comparable period exchange rates. premium growth, including new business and customer retention; GLYPH<127> benefits expense as a percentage of earned premium (loss ratio); GLYPH<127> operating expense as a percentage of earned premium (expense ratio); and GLYPH<127> impact of foreign currency movements. GLYPH<127> (In millions) 2012 2011 2010 Premiums and fees $ 1,984 $ 1,528 $ 1,231 Net investment income 90 83 69 Other revenues 21 15 22 Segment revenues 2,095 1,626 1,322 Benefits and expenses 1,916 1,492 1,192 Income before taxes 179 134 130 Income taxes 36 36 42 Income attributable to redeemable noncontrolling interest 1 - - Income attributable to other noncontrolling interest - 1 4 SEGMENT EARNINGS 142 97 84 Less: special items (after-tax) included in segment earnings: Charge for realignment and efficiency plan (See Note 6 to the Consolidated Financial Statements) (6) - - Costs associated with the acquisition of FirstAssist - (3) – ADJUSTED INCOME FROM OPERATIONS $ 148 $ 100 $ 84 Impact of foreign currency movements using 2011 rates $ (2) Impact of foreign currency movements using 2010 rates $ 4 Realized investment gains, net of taxes $ 1 $ 1 $ 2 Financial Summary