Aetna Releases 2Q 2014 Results

Aetna has reported second-quarter 2014 operating earnings of $610.0 million, or $1.69 per share, a per share increase of 4 percent over the second quarter of 2013.

In its release on July 29, the Company noted thatet income for the second quarter of 2014 was $548.8 million, or $1.52 per share.

"Aetna reported solid results across multiple business lines this quarter, achieving record results for medical membership of 23.1 million members and operating revenues of $14.5 billion," said Mark T. Bertolini, Aetna chairman, CEO and president. "Based on our second-quarter performance, we are raising our projection for full- year 2014 operating earnings per share to a range of $6.45 to $6.60 from our previous projection of $6.35 to $6.55 per share.

"Our results speak to the strength of our diversified portfolio of businesses and our ability to succeed across many fronts. We also continue to experience moderate medical cost trends, and now project Aetna's standalone 2014 Commercial medical cost trend will be in the lower half of our projected range of 6 percent to 7 percent. Our year-to-date results give us increased confidence in our ability to achieve our targeted high single-digit pretax operating margin again in 2014," said Bertolini.

"We also continued to make headway in accelerating Coventry synergies into this year, and for the second time are increasing our 2014 operating earnings per share accretion projection," said Shawn M. Guertin, Aetna executive vice president and CFO. "Based on our progress to date, and our current projections of operating expense savings, we are raising our 2014 Coventry accretion projection by $0.05 to $0.10 per share to a range of $0.55 to $0.60 per share. We continue to project $0.90 per share of accretion in 2015.

"We are pleased with our second-quarter operating results, which were supported by strong operating revenue growth and cash flow, as well as solid operating margins. With this solid performance, we are increasing both our year-end medical membership projection to approximately 23.4 million members from the previous projection of more than 23 million and our full-year 2014 operating revenue projection to at least $57 billion from our previous range of $56 billion to $57 billion," said Guertin.

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 of $584.3 million for the second quarter of 2014 compared with $592.1 million for the second quarter of 2013. Operating earnings were relatively flat in the second quarter of 2014 when compared to the second quarter of 2013 primarily as a result of the year-over-year decrease in favorable development of prior-period health care cost estimates in 2014 substantially offset by the inclusion of approximately one additional month of Coventry financial results in 2014.

-Net income was $521.1 million for the second quarter of 2014 compared with $466.3 million for the second quarter of 2013.

-Operating revenues of $13.8 billion for the second quarter of 2014 compared with $10.9 billion for the second quarter of 2013. The 27 percent increase is due primarily to the inclusion of approximately one additional month of revenue in 2014 from the Coventry acquisition and membership growth, in both our Commercial and Government businesses, as well as the effects of pricing actions designed to recover Health Care Reform mandated fees and taxes. Total revenue was $13.8 billion and $10.8 billion for the second quarters of 2014 and 2013, respectively.

-Sequentially, second-quarter 2014 medical membership increased by 385,000 due to growth in our Commercial Insured and Government products as well as the inclusion of membership from our acquisition of the InterGlobal group.

Our second-quarter 2014 Commercial MBR increased primarily as a result of the year-over-year decrease in favorable development of prior-period health care cost estimates in 2014, costs associated with new hepatitis C treatments, and our 2014 public exchange membership, partially offset by higher premiums driven in part by pricing actions designed to recover Health Care Reform mandated fees and taxes. Our second-quarter 2014 Government MBR improved primarily from actions impacting revenue and medical costs designed to solve for the gap between Medicare premiums and medical costs and other expenses, including the health insurer fee.

-In the second quarter of 2014, we experienced favorable development of prior-period health care cost estimates in both our Commercial and Government businesses, primarily attributable to 2014 performance.

-Prior-years' health care costs payable estimates developed favorably by $531.9 million and $369.6 million during the first half of 2014 and 2013, respectively. The May 7, 2013 acquisition of Coventry significantly impacts the year-over-year comparability of prior years' development. This 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 and does not directly correspond to an increase in our 2014 operating results.

Group Insurance business results

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

-Operating earnings of $60.6 million for the second quarter of 2014 compared with $30.6 million for the second quarter of 2013, primarily due to higher underwriting margins, reflecting improved experience in our Life and Disability products. The second quarter of 2014 life underwriting margin is more consistent with historical experience than the second quarter of 2013.

-Net income of $61.4 million for the second quarter of 2014 compared with $60.3 million for the second quarter of 2013. Net income for the second quarter of 2013 included a $32.1 million after- tax benefit related to the settlement of a reinsurance recoverable.

-Operating revenues of $626.4 million for the second quarter of 2014, an 8 percent increase over $582.4 million for the second quarter of 2013. Total revenue was $627.7 million in the second quarter of 2014 and $587.1 million in the second quarter of 2013.

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 of $5.4 million for the second quarter of 2014 compared with $3.8 million for the second quarter of 2013.

-Net income of $6.6 million for the second quarter of 2014 compared with $57.5 million for the second quarter of 2013. Net income for the second quarter of 2013 included a $55.9 million after- tax benefit related to the reduction of reserves for anticipated future losses on discontinued products primarily due to favorable investment performance as well as favorable retirement experience compared to assumptions we previously made in estimating the reserve.

More Information and Complete Details:

www.aetna.com

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