Aetna Reports First-Quarter 2013 Results
Aetna Reports First-Quarter 2013 Results
First-quarter 2013 operating earnings per share(1)were $1.50
Net income(2)per share was $1.48
Operating revenue(3)increased by more than 7 percent for the first quarter of 2013 over the corresponding period in 2012
Medical membership increased for the fourth consecutive quarter to 18.3 million members at March 31, 2013
Aetna now projects full-year 2013 operating earnings per share to be $5.50 to $5.60(4)
HARTFORD, Conn.--(BUSINESS WIRE)-- Aetna (NYSE: AET) today announced first-quarter 2013 operating earnings (1) of $495.4 million, or $1.50 per share, a per share increase of 12 percent over the first quarter of 2012. Net income (2) for the first quarter of 2013 was $490.1 million, or $1.48 per share, and includes $.08 per share of transaction and integration-related costs related to the proposed acquisition of Coventry Health Care, Inc., offset by $.06 per share of net realized capital gains.
First-Quarter Financial Results at a Glance | ||||||||||||
(Millions, except per share results) | 2013 | 2012 | Change | |||||||||
Operating revenue (3) | $ | 9,506.7 | $ | 8,865.3 | 7 | % | ||||||
Total revenue | 9,538.9 | 8,917.0 | 7 | % | ||||||||
Operating earnings (1) | 495.4 | 477.4 | 4 | % | ||||||||
Net income (2) | 490.1 | 511.0 | (4 | )% | ||||||||
Per share results: | ||||||||||||
Operating earnings (1) | $ | 1.50 | $ | 1.34 | 12 | % | ||||||
Net income (2) | 1.48 | 1.43 | 3 | % | ||||||||
Weighted average common shares - diluted | 330.7 | 356.8 | ||||||||||
"Aetna's strong first-quarter results demonstrate the strength of our diversified business model," said Mark T. Bertolini, Aetna chairman, CEO and president. "Operating revenues increased for the company, and we grew membership for the fourth consecutive quarter fueled by strong growth in our Medicare business. We also introduced Healthagen, a new business brand that combines our population health management solutions and health information technologies to help improve care quality, costs and patient engagement.
"Looking ahead to the remainder of 2013, we continue to expect solid operating performance and project that medical membership will increase to 18.4 million by year end. Based on our results, we now project our 2013 operating earnings will be $5.50 to $5.60 per share, up from our previous projection of at least $5.40 per share. Membership and earnings will also increase following the closing of the Coventry acquisition," said Bertolini.
"Aetna's first-quarter results demonstrate that our businesses are growing and performing well," said Shawn M. Guertin, Aetna senior vice president and CFO. "Year-over-year, we grew operating earnings per share by 12 percent, increased operating revenues by more than 7 percent, and improved our operating expense ratio. During the quarter we continued to aggressively deploy capital to create shareholder value, repurchasing $184 million of Aetna's shares and paying a dividend totaling $66 million. Our operating cash flow generation was excellent.
"Our core business is executing well, and we are well-positioned for the Coventry integration. Our Accountable Care Solutions business continues to work to transform the network model, improve our cost structure and drive additional membership growth. Our capital generation remains strong, and is expected to be stronger once we close the Coventry acquisition," said Guertin.
Total company results
Operating revenues(3) for the first quarter of 2013 were $9.51 billion compared with $8.87 billion for the first quarter of 2012. The more than 7 percent increase is primarily the result of higher Health Care premiums in our Medicare and Medicaid businesses. Total Revenue was $9.54 billion and $8.92 billion for the first quarters of 2013 and 2012, respectively.
Operating Expenses(1) were $1.71 billion for the first quarter of 2013. The operating expense ratio (5) was 18.0 percent and 18.8 percent for the first quarters of 2013 and 2012, respectively. The improvement in the operating expense ratio is primarily driven by operating revenue growth and continued execution of our expense initiatives. The total company expense ratio was 18.2 percent and 18.7 percent for the first quarters of 2013 and 2012, respectively.
Pre-tax Operating Margin(6) was 9.0 percent for the first quarter of 2013 compared with 9.4 percent for the first quarter of 2012. For the first quarter of 2013, the after-tax net income margin was 5.1 percent compared to 5.7 percent for 2012.
Share Repurchases totaled 3.7 million shares at a cost of $184.1 million in the first quarter of 2013.
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 $492.8 million for the first quarter of 2013 compared with $468.9 million for the first quarter of 2012. Operating earnings increased 5 percent in the first quarter of 2013 primarily due to higher underwriting margins in our Commercial business.
Net income (2) was $494.7 million for the first quarter of 2013 compared with $495.9 million for the first quarter of 2012.
Operating revenues (3) of $8.79 billion for the first quarter of 2013 compared with $8.20 billion for the first quarter of 2012. The 7 percent increase is due primarily to higher Medicare premium primarily from our Medicare Advantage business. Total Revenue for the first quarter of 2013 was $8.82 billion compared with $8.24 billion for the first quarter of 2012.
Sequentially, first-quarter 2013 medical membership increased by 159,000 prior to a reduction of approximately 106,000 Medicaid members as a result of the previously announced sale of Missouri Care. Growth in medical membership was led by Medicare Advantage and Medicare Supplement membership. First quarter 2013 medical membership increased 486,000 over the first quarter 2012 prior to the Missouri Care sale.
Medical benefit ratios (MBRs) for the first quarters of 2013 and 2012 were as follows:
2013 | 2012 | |||||||||||||||||||
Commercial | 78.9 | % | 79.9 | % | ||||||||||||||||
Medicare | 87.8 | % | 84.4 | % | ||||||||||||||||
Medicaid | 89.3 | % | 91.6 | % | ||||||||||||||||
Total | 81.9 | % | 81.5 | % |
The improvement in our Commercial MBR is primarily due to the impact of increased favorable development of prior-years' health care cost estimates in 2013. |
Health care costs payable developed favorably by $325 million and $169 million during the first quarters of 2013 and 2012, respectively. This development, reported on a basis consistent with the prior years' development reported in the health care costs payable tables in our annual audited financial statements, does not directly correspond to an increase in our current year operating results. A similar table is available in our first quarter 2013 financial supplement and will be included in our first quarter 2013 Quarterly Report on Form 10-Q when filed.
Group Insurance business results
Group Insurance, which includes group life, disability and long-term care products, reported:
Operating earnings (1) of $31.2 million for the first quarter of 2013 compared with $40.9 million for the first quarter of 2012 primarily reflecting higher operating expenses supporting growth in our life and disability products.
Net income (2) of $34.8 million for the first quarter of 2013 compared with $48.8 million for the first quarter of 2012.
Operating revenues (3) of $581.3 million for the first quarter of 2013, a 9 percent increase over $532.5 million for the first quarter of 2012. Total Revenue was $586.8 million in the first quarter of 2013 and $544.7 million in the first quarter of 2012.
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 (1) of $6.2 million for the first quarter of 2013 compared with $5.8 million for the first quarter of 2012.
Net income (2) of $5.2 million for the first quarter of 2013 compared with $4.5 million for the first quarter of 2012.
Aetna's conference call to discuss first-quarter 2013 results will begin at 8:30 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 1-877-856-1965 or +1-719-325-4794 for international callers. The company suggests participants dial in approximately 10 minutes before the call. The access code is 6144177. 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 6144177. Telephone replays will be available until 11 p.m. ET on May 14, 2013.
About Aetna
Aetna is one of the nation's leading diversified health care benefits companies, serving approximately 38.3 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, workers' compensation administrative services and health information technology services. Aetna's 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 | ||||||||
(Millions) | 2013 | 2012 | ||||||
Revenue: | ||||||||
Health care premiums | $ | 7,785.8 | $ | 7,187.4 | ||||
Other premiums | 521.3 | 476.4 | ||||||
Fees and other revenue | 966.4 | 959.7 | ||||||
Net investment income | 235.1 | 241.8 | ||||||
Net realized capital gains | 30.3 | 51.7 | ||||||
Total revenue | 9,538.9 | 8,917.0 | ||||||
Benefits and expenses: | ||||||||
Health care costs | 6,379.5 | 5,857.5 | ||||||
Current and future benefits | 559.3 | 511.5 | ||||||
Operating expenses: | ||||||||
Selling expenses | 297.2 | 276.3 | ||||||
General and administrative expenses | 1,442.0 | 1,389.7 | ||||||
Total operating expenses | 1,739.2 | 1,666.0 | ||||||
Interest expense | 77.8 | 59.3 | ||||||
Amortization of other acquired intangible assets | 32.4 | 37.8 | ||||||
Total benefits and expenses | 8,788.2 | 8,132.1 | ||||||
Income before income taxes | 750.7 | 784.9 | ||||||
Income taxes | 259.8 | 273.3 | ||||||
Net income including non-controlling interests | 490.9 | 511.6 | ||||||
Less: Net income attributable to non-controlling interests | .8 | .6 | ||||||
Net income attributable to Aetna | $ | 490.1 | $ | 511.0 | ||||
Summary of Results | |||||||||
For the Three Months | |||||||||
(Millions) | 2013 | 2012 | |||||||
Operating earnings | $ | 495.4 | $ | 477.4 | |||||
Transaction and integration-related costs, net of tax | (24.6 | ) | - | ||||||
Net realized capital gains, net of tax | 19.3 | 33.6 | |||||||
Net income (2) (GAAP measure) | $ | 490.1 | $ | 511.0 | |||||
Weighted average common shares - basic | 327.6 | 350.3 | |||||||
Weighted average common shares - diluted | 330.7 | 356.8 | |||||||
Per Common Share | |||||||||
Operating earnings | $ | 1.50 | $ | 1.34 | |||||
Transaction and integration-related costs, net of tax | (.08 | ) | - | ||||||
Net realized capital gains, net of tax | .06 | .09 | |||||||
Net income (2) (GAAP measure) | $ | 1.48 | $ | 1.43 | |||||
Segment Information(7) | ||||||||||
For the Three Months | ||||||||||
(Millions) | 2013 | 2012 | ||||||||
Health Care: | ||||||||||
Operating revenue (excludes net realized capital gains and an other item) | $ | 8,794.7 | $ | 8,201.2 | ||||||
Interest income on proceeds of transaction-related debt | 1.9 | - | ||||||||
Net realized capital gains | 26.3 | 41.6 | ||||||||
Total revenue (GAAP measure) | $ | 8,822.9 | $ | 8,242.8 | ||||||
Commercial Medical Benefit Ratio: | ||||||||||
Premiums | $ | 5,214.0 | $ | 5,177.1 | ||||||
Health care costs | $ | 4,115.1 | $ | 4,135.0 | ||||||
Commercial MBR (GAAP measure) | 78.9 | % | 79.9 | % | ||||||
Medicare Medical Benefit Ratio: | ||||||||||
Premiums | $ | 2,107.3 | $ | 1,651.6 | ||||||
Health care costs | $ | 1,849.8 | $ | 1,393.9 | ||||||
Medicare MBR (GAAP measure) | 87.8 | % | 84.4 | % | ||||||
Medicaid Medical Benefit Ratio: | ||||||||||
Premiums | $ | 464.5 | $ | 358.7 | ||||||
Health care costs | $ | 414.6 | $ | 328.6 | ||||||
Medicaid MBR (GAAP measure) | 89.3 | % | 91.6 | % | ||||||
Total Medical Benefit Ratio: | ||||||||||
Premiums | $ | 7,785.8 | $ | 7,187.4 | ||||||
Health care costs | $ | 6,379.5 | $ | 5,857.5 | ||||||
Total MBR (GAAP measure) | 81.9 | % | 81.5 | % | ||||||
Operating earnings | $ | 492.8 | $ | 468.9 | ||||||
Transaction and integration-related costs, net of tax | (14.8 | ) | - | |||||||
Net realized capital gains, net of tax | 16.7 | |||||||||
