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- Aetna (Nyse: Aet) Announced

The following excerpt is from the company's SEC filing.

-quarter

operating earnings

$668.6 million

per share, a per-share increase of

6 percent

over the

quarter of

. Net income

for the

$560.1 million

per share. Net income for the

includes

per share of charges, which are detailed in the Summary of Results table on page 8.

Third-Quarter Financial Results at a Glance

(Millions, except per share results)

Change

Operating revenue

14,986.1

14,699.5

Total revenue

14,953.0

14,727.8

Operating earnings

Per share results:

Operating earnings

Net income

Weighted average common shares - diluted

Aetna/

“Aetna delivered another quarter of strong results, continuing our momentum from the first half of the year,” said Mark T. Bertolini, Aetna chairman and CEO. “Based on these results, we are raising our projection on full-year 2015 operating earnings per share for the fourth time this year to a range of $7.45 to $7.55 per share from our prior projection of at least $7.40 per share.

“As we finish out the year and look toward 2016 and beyond, we are well-positioned across a number of major growth opportunities, including Medicare and Medicaid. We continue to work diligently on planning for the Humana integration, and we are excited about the value that the combination will create for consumers and shareholders,” said Bertolini.

“We are quite pleased with our third-quarter results, which continue to be supported by strong cash flow and operating margins,” said Shawn M. Guertin, Aetna executive vice president and CFO. “Our strong underwriting results benefited from disciplined pricing and continued moderate medical cost trends.

“We’re also pleased with the continued successful execution of our growth strategy, which will be enhanced by our proposed acquisition of Humana,” said Guertin.

Total company results

were

compared with

$638.6 million

. The increase in operating earnings is primarily due to higher underwriting margins in Aetna's Health Care segment, partially offset by an increase in general and administrative expenses and lower underwriting margins in Aetna's Group Insurance segment.

$594.5 million

. Net income in both periods reflects net charges, which are detailed in the Summary of Results table.

Operating revenues

$15.0 billion

$14.7 billion

. The increase in operating revenues is primarily the result of higher Health Care premium yields as well as membership growth in Aetna's Government business partially offset by membership losses in Aetna's group Commercial Insured products. Total revenue was

quarters of

, respectively.

Operating expenses

$2.8 billion

. The operating expense ratio

18.6 percent

18.2 percent

, respectively. The increase in the operating expense ratio is primarily the result of increased investment spend to support Aetna's growth initiatives that outpaced the increase in operating revenue described above. The total company expense ratio was

18.9 percent

18.4 percent

Pretax operating margin

7.8 percent

. The pretax operating margin increased primarily as a result of higher underwriting margins in Aetna's Government business. The after-tax net income margin was

3.7 percent

4.0 percent

Effective tax rate

45.0 percent

39.9 percent

. The increase in the effective tax rate reflects the impact of health care reform, primarily from the 2015 increase in the non-deductible health insurer fee.

Health Care segment results

Health Care, which provides a full range of insured and self-insured medical, pharmacy, dental and behavioral health products and services, reported:

$675.4 million

$625.6 million

. Operating earnings increased primarily as a result of higher underwriting margins in Aetna's Government business, partially offset by an increase in general and administrative expenses as described in Operating expenses above.

$585.4 million

$576.7 million

$14.3 billion

$14.0 billion

. The increase is due primarily to higher premium yields as well as membership growth in Aetna's Government business partially offset by membership losses in Aetna's group Commercial Insured products. Total revenues were

Sequentially,

medical membership decreased by 169,000 due to declines in Aetna's Commercial Insured products partially offset by growth in Aetna's Government business.

Medical benefit ratios (MBRs) for the three and nine months ended

September 30, 2015

were as follows:

Three Months Ended

Nine Months Ended

September 30,

Total Health Care

Commercial MBR improved over the

primarily as a result of improved performance in Aetna's group Commercial products partially offset by performance in Aetna's ACA compliant products. Aetna recorded $15 million of health care reform risk corridor receivables at September 30, 2015, which represents the portion of the 2014 health care reform risk corridor receivable that is considered collectible. Aetna recorded $56 million of health care reform risk corridor receivables at September 30, 2014.

Government MBR improved over the

primarily as a result of actions impacting revenue and medical costs designed to solve for the gap between Medicare premiums and medical costs and other expenses.

In the

, Aetna experienced favorable development of prior-period health care cost estimates in its Commercial, Medicaid and Medicare products, primarily attributable to second-quarter 2015 performance. In addition, in the third quarter of 2015, Aetna experienced additional favorable development of prior-years' health care cost estimates which resulted in contractual premium reductions under certain customer arrangements, including minimum medical loss ratio requirements in certain of Aetna's Government contracts.

Prior-years' health care costs payable estimates developed favorably by $769.0 million and $549.2 million during the first nine months of

, respectively. This development is reported on a basis consistent with the prior years' development reported in the health care costs payable table in Aetna's annual audited financial statements and does not directly correspond to an increase in

operating results.

Group Insurance segment results

Group Insurance, which includes group life, disability and long-term care products, reported:

$25.6 million

$47.9 million

, primarily due to lower underwriting margins in Aetna's Life products.

$22.8 million

$52.6 million

$614.1 million

$621.4 million

$609.8 million

$628.7 million

Large Case Pensions segment results

Large Case Pensions, which manages a variety of discontinued and other retirement and savings products, primarily for qualified pension plans, reported:

$4.4 million

$4.9 million

$0.6 million

$5.0 million

Operating revenues

$68.2 million

$86.3 million

, primarily reflecting lower net investment income. Total revenues were

$62.4 million

$86.5 million

Aetna's conference call to discuss

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 website at www.aetna.com/investor. 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 1-877-709-8150, or +1-201-689-8354 for

international callers. The company suggests participants dial in approximately 10 minutes before the call. No access code is required. 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 1-877-660-6853, or +1-201-612-7415 for international callers. The replay conference ID is 13621717. Telephone replays will be available until 11 p.m. ET on November 12, 2015.

About Aetna

Aetna is one of the nation's leading diversified health care benefits companies, serving an estimated 46.5 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 products and 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 and learn about how Aetna is helping to build a healthier world. @AetnaNews

Consolidated Statements of Income

For the Three Months

For the Nine Months

Ended September 30,

(Millions)

Revenue:

Health care premiums

12,834.8

12,588.4

38,711.4

36,916.2

Other premiums

1,627.5

1,652.1

Fees and other revenue

1,394.5

1,337.7

4,278.5

3,876.0

Net investment income

Net realized capital (losses) gains

Total revenue

45,288.0

43,232.0

Benefits and expenses:

Health care costs

10,409.5

10,354.5

31,146.3

30,245.6

Current and future benefits

1,596.1

1,625.9

Operating expenses:

Selling expenses

1,213.6

1,238.1

General and administrative expenses

2,437.3

2,292.4

7,235.2

6,528.2

Total operating expenses

2,830.3

2,714.7

8,448.8

7,766.3

Interest expense

Amortization of other acquired intangible assets

Loss on early extinguishment of long-term debt

Total benefits and expenses

13,930.1

13,730.9

41,636.9

40,160.8

Income before income taxes

1,022.9

3,651.1

3,071.2

Income taxes

1,577.8

1,255.8

Net income including non-controlling interests

2,073.3

1,815.4

Less: Net income attributable to non-controlling interests

Net income attributable to Aetna

2,069.4

1,808.8

2,235.0

1,970.6

Transaction and integration-related costs, net of tax

(101.9

Litigation-related proceeds, net of tax

Loss on early extinguishment of long-term debt, net of tax

Release of litigation-related reserve, net of tax

Amortization of other acquired intangible assets, net of tax

(124.8

(119.4

Net realized capital (losses) gains, net of tax

(GAAP measure)

Weighted average common shares - basic

Per Common Share

Segment Information

Health Care:

(excludes net realized capital (losses)

gains and an other...


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