Aetna Reports Fourth-Quarter and Full-Year 2010 Results
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HARTFORD, Conn., February 04, 2011 —
Aetna (NYSE: AET) today announced fourth-quarter 2010 operating earnings(1) of $255.0 million, or $.63 per share, a per share increase of 58 percent over 2009.
Full-year 2010 operating earnings were $1.6 billion, or $3.68 per share, a per share increase of 34 percent over 2009. The increase in both the fourth quarter and full-year 2010 operating earnings were largely the result of higher Commercial underwriting margins driven by management actions to appropriately price the business, and lower utilization, as well as a reduced number of shares outstanding, partially offset by lower Commercial Insured membership.
Full-year 2010 operating earnings also reflect favorable prior-period reserve development.
Net income for the fourth quarter was $215.6 million, or $.53 per share, including $.10 per share of net realized capital gains and other items.
Full-year net income was $1.8 billion, or $4.18 per share, a per share increase of 47 percent over 2009.
Group Insurance business results Group Insurance, which includes group life, disability and long-term care products, reported:
Large Case Pensions business results Large Case Pensions, which manages a variety of discontinued and other retirement and savings products, primarily qualified pension plans, reported:
Total company results
Aetna's conference call to discuss fourth quarter 2010 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 web site. The conference call also can be accessed by dialing 877-548-7906 or 719-325-4869 for international callers. The company suggests participants dial in approximately 10 minutes before the call. The access code is 3403615. 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 888-203-1112, or 719-457-0820 for international callers. The replay access code is 3403615. Telephone replays will be available from 11:00 a.m. ET on February 4, 2011 until 11 p.m. ET on February 18, 2011. About Aetna Aetna is one of the nation's leading diversified health care benefits companies, serving approximately 35.3 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities and health care management services for Medicaid plans. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, governmental units, government-sponsored plans, labor groups and expatriates. For more information, see www.aetna.com.       (1) Operating earnings and operating earnings per share exclude net realized capital gains and losses and other items, if any, from net income. Although the excluded items may recur, management believes that operating earnings and operating earnings per share provide a more useful comparison of Aetna's underlying business performance from period to period. Management uses operating earnings to assess business performance and to make decisions regarding Aetna's operations and allocation of resources among Aetna's businesses. Operating earnings is also the measure reported to the Chief Executive Officer for these purposes. The following items are excluded from operating earnings because we believe they neither relate to the ordinary course of our business nor reflect our underlying business performance:
(2) Projected operating earnings per share exclude any future net realized capital gains and losses and other items, if any, from net income. Aetna is not able to project the amount of future net realized capital gains and losses and therefore cannot reconcile projected operating earnings to projected net income in any period. Projected operating earnings per share for the full year 2011 reflect approximately 384 million weighted average diluted shares. (3) Revenue excludes net realized capital gains and losses and the 2009 ESI settlement as noted in (1) above. Refer to tables on pages 10, 11 and 13 of this press release for a reconciliation of revenue excluding net realized capital gains and losses to revenue calculated under GAAP. (4) The operating expense ratio excludes net realized capital gains and losses and other items, if any. For a reconciliation of this metric to the comparable GAAP measure refer to page 11 of this press release. (5) In order to provide useful information regarding Aetna's profitability on a basis comparable to others in the industry, without regard to financing decisions, income taxes or amortization of other acquired intangible assets (each of which may vary for reasons not directly related to the performance of the underlying business), Aetna's pretax operating margin is based on operating earnings excluding interest expense, income taxes and amortization of other acquired intangible assets. Management also uses pretax operating margin to assess Aetna's performance, including performance versus competitors. (6) Revenue and operating expense information is presented before income taxes. Operating earnings is presented net of income taxes. (7) Our Corporate Financing segment is not a business segment. It is added to our business segments to reconcile to our consolidated results. The Corporate Financing segment includes interest expense on our outstanding debt and the financing components of our pension and other postretirement benefit plan expenses. (8) Represents members in consumer-directed health plans included in Aetna's Commercial medical membership. (9) Represents members in products that allow these members access to Aetna's dental provider network for a nominal fee. (10) Represents members who purchased medications through Aetna's mail order pharmacy operations during the quarterly period and are included in pharmacy membership above. CAUTIONARY STATEMENT; ADDITIONAL INFORMATION -- -- Certain information in this press release is forward-looking, including our projections as to operating earnings per share and weighted average diluted shares, and the timing and amount of any future dividends. Forward-looking information is based on management's estimates, assumptions and projections, and is subject to significant uncertainties and other factors, many of which are beyond Aetna's control. Important risk factors could cause actual future results and other future events to differ materially from those currently estimated by management, particularly the implementation of health care reform legislation and changes in Aetna's future cash requirements, capital requirements, results of operations, financial condition and/or cash flows. Health care reform will significantly impact our business operations and financial results, including our medical benefit ratios. Components of the legislation will be phased in over the next seven years, and we will be required to dedicate material resources and incur material expenses during that time to implement health care reform. Many significant parts of the legislation, including medical loss ratios, require further guidance and clarification both at the federal level and in the form of regulations and actions by state legislatures to implement the law. As a result, many of the impacts of health care reform will not be known for the next several years. Other important risk factors include adverse and less predictable economic conditions in the U.S. and abroad (including unanticipated levels of or rate of increase in the unemployment rate); adverse changes in health care reform and/or other federal or state government policies or regulations as a result of health care reform, changes in health care reform or otherwise (including legislative, judicial or regulatory measures that would affect our business model, restrict funding for various aspects of health care reform, limit our ability to price for the risk we assume and/or reflect reasonable costs or profits in our pricing, such as mandated minimum medical benefit ratios, eliminate or reduce ERISA pre-emption of state laws (increasing our potential litigation exposure) or mandate coverage of certain health benefits); our ability to differentiate our products and solutions from those offered by our competitors, and demonstrate that our products lead to access to better quality of care by our members; unanticipated increases in medical costs (including increased intensity or medical utilization as a result of the H1N1 or other flu, increased COBRA participation rates or otherwise; changes in membership mix to higher cost or lower-premium products or membership-adverse selection; changes in medical cost estimates due to the necessary extensive judgment that is used in the medical cost estimation process, the considerable variability inherent in such estimates, and the sensitivity of such estimates to changes in medical claims payment patterns and changes in medical cost trends; increases resulting from unfavorable changes in contracting or re-contracting with providers, and increased pharmacy costs); failure to achieve and/or delays in achieving desired rate increases and/or profitable membership growth due to regulatory restrictions, the difficult economy and/or significant competition, especially in key geographic areas where membership is concentrated; adverse changes in size, product mix or medical cost experience of membership; our ability to diversify our sources of revenue and earnings; adverse pricing or funding actions by federal or state government payors; the ability to successfully implement our agreement with CVS Caremark Corporation on a timely basis and in a cost-efficient manner and to achieve projected operating efficiencies for the agreement; our ability to integrate, simplify, and enhance our existing information technology systems and platforms to keep pace with changing customer and regulatory needs; the success of our health information technology initiatives; the ability to successfully integrate our businesses (including acquired businesses) and implement multiple strategic and operational initiatives simultaneously; managing executive succession and key talent retention, recruitment and development; the ability to reduce administrative expenses while maintaining targeted levels of service and operating performance; the outcome of various litigation and regulatory matters, including the sanctions imposed on us by CMS, the CMS risk adjustment audits of certain of our Medicare contracts, guaranty fund assessments and litigation concerning, and ongoing reviews by various regulatory authorities of, certain of our payment practices with respect to out-of-network providers; reputational issues arising from data security breaches or other means; the ability to improve relations with providers while taking actions to reduce medical costs and/or expand the services we offer; our ability to maintain our relationships with third party brokers, consultants and agents who sell our products; increases in medical costs or Group Insurance claims resulting from any epidemics, acts of terrorism or other extreme events; and a downgrade in our financial ratings. For more discussion of important risk factors that may materially affect Aetna, please see the risk factors contained in Aetna's 2009 Annual Report on Form 10-K (Aetna's "2009 Annual Report") and Aetna's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010 (Aetna's "Quarterly Reports"), each on file with the Securities and Exchange Commission (the "SEC"). You also should read Aetna's 2009 Annual Report and Aetna's 2010 Quarterly Reports on file with the SEC and Aetna's 2010 Annual Report on Form 10-K when filed with the SEC for a discussion of Aetna's historical results of operations and financial condition. |
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