Aetna Beats, Raises Guidance - Analyst Blog
28 October 2011 - 4:00AM
Zacks
The third largest commercial health insurer Aetna
Inc. (AET) has posted third quarter 2011 earnings of $1.40
per share, significantly ahead of the Zacks Consensus Estimate of
$1.14 as well as the year-ago quarter’s earnings of $1.00 per
share.
Declining utilization, strong performance across all the product
lines, disciplined pricing and medical cost trends accounted for
the earnings upside.
However, including net realized capital gains and other items,
net income stood at 490.4 million, down 1.0% year over year.
Thecompany’s total revenue for the reported quarter inched down
1% year over year to $8.5 billion, mainly due to a decline in
earned premium.
Operating Expenses were $1.7 billion up 4.9%
year over year, while the operating expense ratio was 20.0%
compared with 18.9% for the third quarter of 2010. The increase in
the operating expense ratio is driven primarily by the inclusion of
acquisitions, the settlement of certain contractual disputes,
increased investment spending, including open enrollment
initiatives, and lower revenue.
Segmental Performance
Aetna’s Health Care segment recorded revenues
of $7.8 billion, unchanged relative to the prior year quarter.
Total premium collected dropped 2.0% year over year to $6.8 billion
due to a decline in commercial business and Medicare business.
Total medical membership declined by 11,000 year over year to 18.23
million.
The company’s Group Insurance revenues dropped
2.5% year over year to $489.5 million. However, thesegment’s
operating earnings increased 9.5% year over year to $37.9
million
At Large Case Pensions, revenues hiked 3.8%
year over year to $128.1 million, while operating earnings declined
21% to $4.4 million.
Outlook
Followingits better-than-expected results year to date, Aetna
has raised its full-year 2011 operating earnings per share guidance
for the third time this year to $5.00 from the range of $4.60–$4.70
previously. It also projected 2012 earning of $5.00 per share.
Year till date, Aetna has posted strong earnings helped by of
strong performance across all product lines from lower than
projected utilization and disciplined execution of our pricing and
medical cost management strategies. The company is aggressively
growing its Medicare business and the recently announced
acquisition of Genworth Medicare Supplement is a step in this
direction.
Aetna has also spent approx $1.6 billion through October on
acquisitions. Through its acquisition strategy, Aetna is gearing
itself up for the changes that the Health Care Act will bring in
when its provisions become applicable in 2014.
Aetna competes closely with UnitedHealth
Group Inc. (UNH) and WellPoint Inc. (WLP)
both of which reported higher than expected earnings and raised
earnings guidance. We expect similar performance from CIGNA
Corp. (CI), another competitor which is expected to report
earnings on November 3, 2011.
AETNA INC-NEW (AET): Free Stock Analysis Report
CIGNA CORP (CI): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
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