Hartford, CT -(BusinessWire)- Aetna (NYSE: AET) announced fourth-quarter 2013 operating earnings (1) of $495.4 million, or $1.34 per share, a per share increase of 43 percent over the fourth quarter of 2012. Full-year 2013 operating earnings were $2.1 billion, or $5.85 per share. Net income (2) for the fourth quarter of 2013 was $368.9 million, or $1.00 per share. Net income for the quarter includes $.25 per share of transaction, integration-related and restructuring costs and a $.10 per share charge for changes in our life insurance claim payment practices, partially offset by $.01 per share of net realized capital gains. Full-year 2013 net income was $1.9 billion, or $5.33 per share. Aetna reaffirms full-year 2014 operating earnings per share projection of at least $6.25 (4). Beginning with 2014, Aetna’s operating earnings and operating earnings per share and related projections exclude after tax amortization of other acquired intangible assets.
“In 2013 Aetna completed the largest acquisition in our history, and delivered record annual operating revenues and operating earnings,” said Mark T. Bertolini, Aetna chairman, CEO and president. “We also achieved 14-percent growth in operating earnings per share year over year, well in excess of our long-term objective. Aetna’s solid fourth-quarter performance closes a great year for the company and is a continued testament to the strength of our diversified portfolio.
“We have strong momentum leading into 2014. We ended 2013 with record medical membership of nearly 22.2 million, and we now project medical membership to increase by approximately 50,000 at the end of the first quarter of 2014. One area of notable growth is in our Medicare Advantage business, which we project will add at least 110,000 new members in the first quarter. In 2014 we also expect to further expand our value-based network, including accountable care collaborations, which currently encompasses more than 1.5 million medical members,” said Bertolini.
“Aetna’s operating results for the fourth quarter and full year continue to be supported by solid revenue growth and operating margins,” said Shawn M. Guertin, Aetna executive vice president and CFO. “Aetna performed well across our core businesses in the fourth quarter, and our Coventry Health Care business continued to operate at the high end of our projections.
“We also had another strong year of cash generation, helping us to fund the Coventry acquisition and enabling us to repurchase $1.4 billion of our shares and increase our shareholder dividend. In total, Aetna returned nearly $1.7 billion of capital to our shareholders. Our financial position, capital structure and liquidity all continue to be very strong,” said Guertin.
Total company results
- Operating earnings (1) were $495.4 million for the fourth quarter of 2013 compared with $317.0 million for the fourth quarter of 2012. Full-year 2013 operating earnings were $2.1 billion compared with $1.8 billion for full-year 2012. The increase in operating earnings in each period is primarily due to the inclusion of results from the acquisition of Coventry as well as higher underwriting margins primarily in our underlying Commercial business, partially offset by lower underwriting margins in our underlying Medicare business for the full year 2013.
- Operating revenues (3) for the fourth quarter of 2013 were $13.1 billion compared with $9.0 billion for the fourth quarter of 2012. For full-year 2013, operating revenues were $47.2 billion compared with $35.5 billion for 2012. The increase in operating revenues in each period is primarily the result of higher Health Care premiums from the acquisition of Coventry as well as growth in our underlying Medicare membership and underlying Commercial Insured premium yield growth. Total revenue was $13.2 billion and $9.9 billion for the fourth quarters of 2013 and 2012, respectively, and $47.3 billion and $36.6 billion for full-year 2013 and 2012, respectively.
- Operating Expenses (1) were $2.4 billion for the fourth quarter of 2013. The operating expense ratio (5) was 18.0 percent and 19.7 percent for the fourth quarters of 2013 and 2012, respectively. Our full-year operating expense ratio was 17.7 percent and 18.9 percent for 2013 and 2012, respectively. The improvement in the operating expense ratio is primarily driven by operating revenue growth from the acquisition of Coventry and continued execution of our expense initiatives, including execution on our Coventry-related cost synergies. The total company expense ratio was 19.0 percent and 19.4 percent for the fourth quarters of 2013 and 2012, respectively, and 18.3 percent and 18.8 percent for the full years of 2013 and 2012, respectively.
- Pre-tax Operating Margin (6) was 6.7 percent for the fourth quarter of 2013 compared with 6.5 percent for the fourth quarter of 2012. For full-year 2013, the pre-tax operating margin was 7.9 percent compared with 8.7 percent for full-year 2012. For the fourth quarter of 2013, the after-tax net income margin was 2.8 percent compared to 1.9 percent for the fourth-quarter of 2012. For full-year 2013, the after-tax net income margin was 4.0 percent compared to 4.5 percent for 2012.
Outstanding Shares were 362.2 million and 327.6 million as of December 31, 2013 and 2012, respectively. Share repurchases in the fourth quarter of 2013 totaled 6.8 million shares at a cost of $450 million. Full-year 2013 total repurchases were 23.0 million shares at a cost of $1.4 billion.
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 $493.0 million for the fourth quarter of 2013 compared with $307.9 million for the fourth quarter of 2012. Operating earnings were 60 percent higher in the fourth quarter of 2013 primarily due to the acquisition of Coventry as well as higher underwriting margins primarily in our underlying Commercial business.
- Net income (2) was $402.4 million for the fourth quarter of 2013 compared with $217.0 million for the fourth quarter of 2012.
- Operating revenues (3) of $12.4 billion for the fourth quarter of 2013 compared with $8.3 billion for the fourth quarter of 2012. The 50 percent increase is due primarily to the inclusion of Coventry revenue as well as growth in our underlying Medicare membership and underlying Commercial Insured premium yield growth. Total revenue for the fourth quarter of 2013 was $12.4 billion compared with $8.3 billion for the fourth quarter of 2012.
- Sequentially, fourth-quarter 2013 medical membership increased by 38,000 due to growth in our Commercial Insured and Medicare businesses, partially offset by a modest decline in Medicaid membership.
- Our fourth-quarter 2013 Commercial MBR includes increased favorable development of prior periods’ health care cost estimates, primarily attributable to 2013 performance, and the favorable effect of the collection of Affordable Care Act fees and taxes. The increase in our fourth-quarter 2013 Medicare MBR is primarily due to reflecting favorable 2012 experience in customer premiums on renewal in 2013 as well as underperformance in two specific Medicare product offerings and the impacts of sequestration. The improvement in our fourth-quarter 2013 Medicaid MBR is primarily due to the inclusion of Coventry, which added geographies carrying relatively lower MBRs.
- Prior-years’ health care costs payable estimates developed favorably by $448.8 million and $146.7 million during 2013 and 2012, respectively. This development does not directly correspond to an increase in our 2013 operating results. The development is reported on a basis consistent with the prior years’ development reported in the health care costs payable table in our annual audited financial statements.
Full-year 2013 operating earnings (1) for Health Care were $2.1 billion, compared with $1.8 billion in 2012. The increase in operating earnings was primarily due to the acquisition of Coventry in May 2013, as well as higher underwriting margins in our underlying Commercial business, partially offset by lower underwriting margins in our underlying Medicare business. Full-year 2013 net income (2) was $1.9 billion compared with $1.7 billion in 2012.
Group Insurance business results
Group Insurance, which includes group life, disability and long-term care products, reported:
- Operating earnings (1) of $47.2 million for the fourth quarter of 2013 compared with $45.3 million for the fourth quarter of 2012.
- Net income (2) of $12.9 million for the fourth quarter of 2013 compared with $49.6 million for the fourth quarter of 2012. Fourth-quarter 2013 net income includes a $35.7 million charge for changes during the fourth quarter of 2013 in our life insurance claim payment practices based on evolving industry practices and regulatory expectations and interpretations.
- Operating revenues (3) of $591.3 million for the fourth quarter of 2013, a 10 percent increase over $535.2 million for the fourth quarter of 2012. Total revenue was $593.6 million in the fourth quarter of 2013 and $541.8 million in the fourth quarter of 2012.
Full-year 2013 operating earnings (1) for Group Insurance were $128.0 million, compared with $161.5 million in 2012. Operating earnings for 2013 declined compared to 2012, primarily reflecting lower underwriting margins in our Group Life products due to higher claim incidence, partially offset by higher underwriting margins in our Disability products. Full-year 2013 net income (2) was $125.2 million, compared to $176.3 million in 2012. Full-year 2013 net income includes the $35.7 million charge in the fourth quarter for changes in our life insurance claim payment practices and lower net realized capital gains, partially offset by a $32.1 million benefit related to the settlement of a reinsurance recoverable.
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 $5.0 million for the fourth quarter of 2013 compared with $4.4 million for the fourth quarter of 2012.
- Net income (2) of $3.7 million for the fourth quarter of 2013 compared with $5.1 million for the fourth quarter of 2012.
- Operating revenues (3) of $119.3 million for the fourth quarter of 2013 compared with $131.6 million for the fourth quarter of 2012. Total revenue, which includes net realized capital losses or gains, was $162.1 million in the fourth quarter of 2013 compared with $1.1 billion in the fourth quarter of 2012. Fourth-quarter 2013 and 2012 total revenue also include $44.9 million and $941.4 million, respectively, of group annuity conversion premium related to the conversion of existing Large Case Pensions group annuity contracts from participating to non-participating contracts. That revenue in each period is offset by an equivalent benefit expense associated with each contract conversion.
Full-year 2013 operating earnings (1) for Large Case Pensions were $21.2 million, compared with $17.8 million for 2012. Full-year 2013 net income (2) was $68.8 million, compared with $17.4 million for 2012. Full-year 2013 net income includes a $55.9 million benefit related to the reduction of reserves for anticipated future losses on discontinued products. Full-year 2013 operating revenues (3) were $470.0 million, compared with $505.6 million for 2012. Full-year total revenue, which includes group annuity contract conversion premium on existing contracts and net realized capital losses in each period, was $556.2 million for 2013, compared with $1.4 billion for 2012.
The complete earnings release is available here: Aetna Fourth-Quarter and Full-Year 2013 Results (PDF)
Source: BusinessWire
Disclosure: Coventry WCS is a WorkCompWire ad partner.
This is not a paid placement.