Aetna Reports Third-Quarter 2012 Results
Aetna Reports Third-Quarter 2012 Results
Third-quarter 2012 operating earnings per share(1)were $1.55
Net income per share was $1.47
Total medical benefit ratio was 80.7 percent in the third quarter 2012
Medical membership totaled 18.2 million members at September 30, 2012
Aetna now projects full-year 2012 operating earnings per share of approximately $5.10(2)
HARTFORD, Conn.--(BUSINESS WIRE)-- Aetna (NYSE: AET) today announced third-quarter 2012 operating earnings (1) of $523.2 million, or $1.55 per share, a per share increase of 11 percent over the third quarter of 2011. Net income for the third quarter of 2012 was $499.2 million, or $1.47 per share, and includes a $.07 per share loss on the early extinguishment of long-term debt, $.04 per share of transaction-related costs associated with the proposed acquisition of Coventry Health Care, Inc. and $.03 per share of net realized capital gains.
Third-Quarter Financial Results at a Glance | ||||||||||||
(Millions, except per share results) | 2012 | 2011 | Change | |||||||||
Revenue (3) | $ | 8,899.2 | $ | 8,396.7 | 6 | % | ||||||
Operating earnings (1) | 523.2 | 528.4 | (1 | )% | ||||||||
Net income | 499.2 | 490.4 | 2 | % | ||||||||
Per share results: | ||||||||||||
Operating earnings (1) | 1.55 | 1.40 | 11 | % | ||||||||
Net income | 1.47 | 1.30 | 13 | % | ||||||||
Weighted average common shares - diluted | 338.6 | 376.8 | ||||||||||
"Aetna's strong performance in the third quarter is the result of our diversified business model, and demonstrates the rigor with which we manage our operations," said Mark T. Bertolini, Aetna chairman, CEO and president. "We've achieved our full-year medical membership guidance level of approximately 18.2 million medical members and remain focused on a disciplined balance between profitability and growth.
"Our emerging businesses strategy continues to see positive results from collaboration with providers, including lower costs, higher care quality and added membership for our core businesses. We just announced our newest accountable care organization plus a package of commercial health plans with a group of independent physician practice associations in California. To date, Aetna has 11 signed Accountable Care Solutions partnerships, with 26 letters of intent and a robust pipeline of prospects," said Bertolini.
"The third quarter was an important one for Aetna," said Joseph M. Zubretsky, Aetna senior executive vice president and CFO. "We committed to deploy more than $7 billion of capital for our proposed acquisition of Coventry Health Care. We continued to execute on the fundamentals of our business and deliver solid financial performance this year, including a 6 percent increase in revenues and strong cash flow generation.
"Based on our year-to-date performance, we are raising our full-year 2012 operating earnings per share guidance to approximately $5.10 per share. Looking beyond 2012, we believe we have the winning strategy in the marketplace. Our core businesses, supplemented by emerging businesses growth and effective capital deployment, position Aetna for growth," said Zubretsky.
Total company results
Revenues(3) for the third quarter of 2012 were $8.90 billion compared with $8.40 billion for the third quarter of 2011. The increase is primarily the result of higher Health Care premiums in each of our Commercial, Medicare and Medicaid businesses. Total Revenue, which includes net realized capital gains, was $8.92 billion and $8.48 billion for the third quarters of 2012 and 2011, respectively.
Operating Expenses(1) were $1.63 billion for the third quarter of 2012. The business segment operating expense ratio (4) was 18.3 percent in the third quarter of 2012 and 20.0 percent in the third quarter of 2011. The decrease in the business segment operating expense ratio is primarily due to continued execution on our expense initiatives, including the effects of the voluntary early retirement program announced in 2011. Including net realized capital gains and other items excluded from operating earnings(1) as described on page 9 of this news release, these ratios were 18.4 percent and 21.4 percent for the third quarters of 2012 and 2011, respectively.
Corporate Financing Interest Expense was $42.1 million and $38.8 million after-tax for the third quarters of 2012 and 2011, respectively.
Net Income was $499.2 million for the third quarter of 2012 compared with $490.4 million for the third quarter of 2011.
Pre-tax Operating Margin(5) was 10.2 percent for the third quarter of 2012 compared with 10.7 percent for the third quarter of 2011. For the third quarter of 2012, the after-tax net income margin was 5.6 percent compared to 5.8 percent for 2011.
Health Care business results
Health Care, which provides a full range of insured and self-insured medical, pharmacy, dental and behavioral health products and services, reported:
Operating earnings (1) of $531.8 million for the third quarter of 2012 compared with $525.7 million for the third quarter of 2011. Favorable before-tax development of prior-period health care cost estimates in the third quarters of 2012 and 2011 was approximately $96 million ($61 million after tax) and $181 million ($117 million after tax), respectively, primarily from incurred health care costs from the second quarter of 2012 and second quarter of 2011, respectively. Excluding the after-tax impact of favorable prior-period reserve development, operating earnings increased in 2012 primarily due to higher Commercial and Medicare underwriting margins. The increase in Medicare underwriting margins resulted from the 2011 acquisition of Genworth's Medicare Supplement business.
Net income was $532.3 million for the third quarter of 2012 compared with $471.3 million for the third quarter of 2011.
Revenues (3) of $8.24 billion for the third quarter of 2012 compared with $7.78 billion for the third quarter of 2011. The increase is due primarily to higher Medicare premium from the addition of Genworth's Medicare Supplement business and Medicare Advantage membership growth and higher Commercial Health Care premium primarily from higher premium rates, partially offset by lower Commercial Insured membership in 2012. Total Revenue for the third quarter of 2012, which includes net realized capital gains, was $8.26 billion compared with $7.83 billion for the third quarter of 2011.
Medical benefit ratios (MBRs) for the third quarters of 2012 and 2011 were as follows:
2012 | 2011 | |||||||||||||||||||||||||||||
Commercial | 79.6 | % | 77.8 | % | ||||||||||||||||||||||||||
Medicare | 82.5 | % | 81.4 | % | ||||||||||||||||||||||||||
Medicaid | 87.6 | % | 84.7 | % | ||||||||||||||||||||||||||
Total (a) | 80.7 | % | 78.9 | % | ||||||||||||||||||||||||||
(a) Total MBR includes favorable prior-period reserve development of $96 million and $181 million for the third quarters of 2012 and 2011, respectively, which occurred in each of our businesses with the majority related to the Commercial business in each period. | ||||||||||||||||||||||||||||||
Sequentially, third-quarter 2012 medical membership increased by 149,000 to 18.178 million, reflecting growth in each of our Medicaid, Commercial and Medicare businesses; dental membership increased by 18,000 to 13.608 million and pharmacy benefit management services membership increased by 154,000 to 8.815 million.
Group Insurance business results
Group Insurance, which includes group life, disability and long-term care products, reported:
Operating earnings (1) of $29.3 million for the third quarter of 2012 compared with $37.9 million for the third quarter of 2011, reflecting lower underwriting margins in our life insurance products.
Net income of $33.2 million for the third quarter of 2012 compared with $51.1 million for the third quarter of 2011, reflecting lower underwriting margins in our life insurance products as well as lower after-tax net realized capital gains in the third quarter of 2012.
Revenues (3) of $530.8 million for the third quarter of 2012 compared with $489.0 million for the third quarter of 2011. Third-quarter Total Revenue, which includes net realized capital gains, was $536.7 million in the third quarter of 2012 and $509.3 million in the third quarter of 2011.
Large Case Pensions business results
Large Case Pensions, which manages a variety of discontinued and other retirement and savings products, primarily for qualified pension plans, reported:
Operating earnings of $3.7 million for the third quarter of 2012 compared with $4.4 million for the third quarter of 2011.
Net income of $.8 million for the third quarter of 2012 compared with $7.6 million for the third quarter of 2011, reflecting net realized capital losses in the third quarter of 2012.
Aetna's conference call to discuss third-quarter 2012 results will begin at 7:30 a.m. ET today. The public may access the conference call through a live audio webcast available on Aetna's Investor Information link on the Internet at www.aetna.com. Financial, statistical and other information, including GAAP reconciliations, related to the conference call also will be available on Aetna's Investor Information website.
The conference call also can be accessed by dialing 1-888-352-6793 or +1-719-325-2204 for international callers. The company suggests participants dial in approximately 10 minutes before the call. The access code is 6373334. Individuals who dial in will be asked to identify themselves and their affiliations.
A replay of the call may be accessed through Aetna's Investor Information link on the Internet at www.aetna.com or by dialing 1-888-203-1112, or +1-719-457-0820 for international callers. The replay access code is 6373334. Telephone replays will be available until 11 p.m. ET on November 7, 2012.
About Aetna
Aetna is one of the nation's leading diversified health care benefits companies, serving approximately 37.3 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities, Medicaid health care management services and health information technology services. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups and expatriates. For more information, see www.aetna.com.
Consolidated Statements of Income | |||||||||||||||||
For the Three Months | For the Nine Months | ||||||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||||||
(Millions) | 2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenue: | |||||||||||||||||
Health care premiums | $ | 7,246.8 | $ | 6,776.7 | $ | 21,602.1 | $ | 20,260.7 | |||||||||
Other premiums | 482.1 | 439.8 | 1,427.2 | 1,336.9 | |||||||||||||
Fees and other revenue | 954.9 | 946.6 | 2,881.7 | 2,742.7 | |||||||||||||
Net investment income | 215.4 | 233.6 | 678.8 | 727.5 | |||||||||||||
Net realized capital gains | 17.3 | 78.6 | 77.6 | 139.7 | |||||||||||||
Total revenue | 8,916.5 | 8,475.3 | 26,667.4 | 25,207.5 | |||||||||||||
Benefits and expenses: | |||||||||||||||||
Health care costs | 5,847.7 | 5,345.5 | 17,613.5 | 16,060.3 | |||||||||||||
Current and future benefits | 516.9 | 470.7 | 1,511.1 | 1,433.9 | |||||||||||||
Operating expenses: | |||||||||||||||||
Selling expenses | 272.8 | 269.1 | 820.5 | 827.0 | |||||||||||||
General and administrative expenses | 1,366.8 | 1,547.2 | 4,131.5 | 4,144.5 | |||||||||||||
Total operating expenses | 1,639.6 | 1,816.3 | 4,952.0 | 4,971.5 | |||||||||||||
Interest expense | 68.5 | 59.7 | 192.2 | 187.3 | |||||||||||||
Amortization of other acquired intangible assets | 34.1 | 31.7 | 108.9 | 83.6 | |||||||||||||
Loss on early extinguishment of long-term debt | 35.4 | - | 35.4 | - | |||||||||||||
Total benefits and expenses | 8,142.2 | 7,723.9 | 24,413.1 | 22,736.6 | |||||||||||||
Income before income taxes | 774.3 | 751.4 | 2,254.3 | 2,470.9 | |||||||||||||
Income taxes | 275.1 | 261.0 | 786.5 | 857.8 | |||||||||||||
Net income | $ | 499.2 | $ | 490.4 | $ | 1,467.8 | $ | 1,613.1 | |||||||||
Summary of Results | |||||||||||||||||||||
For the Three Months | For the Nine Months | ||||||||||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||||||||||
(Millions) | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||
Operating earnings | $ | 523.2 | $ | 528.4 | $ | 1,452.6 | $ | 1,611.4 | |||||||||||||
Transaction-related costs, net of tax | (12.5 | ) | - | (12.5 | ) | - | |||||||||||||||
Loss on early extinguishment of long-term debt, net of tax | (23.0 | ) | - | (23.0 | ) | - | |||||||||||||||
Voluntary early retirement program, net of tax | - | (89.1 | ) | - | (89.1 | ) | |||||||||||||||
Net realized capital gains, net of tax | 11.5 | 51.1 | 50.7 | 90.8 | |||||||||||||||||
Net income (GAAP measure) | $ | 499.2 | $ | 490.4 | $ | 1,467.8 | $ | 1,613.1 | |||||||||||||
Weighted average common shares - basic | 334.8 | 369.2 | 342.2 | 377.2 | |||||||||||||||||
Weighted average common shares - diluted | 338.6 | 376.8 | 347.2 | 385.0 | |||||||||||||||||
Per Common Share | |||||||||||||||||||||
Operating earnings | $ | 1.55 | $ | 1.40 | $ | 4.18 | $ | 4.19 | |||||||||||||
Transaction-related costs, net of tax | (.04 | ) | |||||||||||||||||||
