Strong 1Q Earnings for Aetna, View Up - Analyst Blog
April 30 2013 - 7:44AM
Zacks
U.S. health insurer, Aetna Inc. (AET) reported
first-quarter 2013 earnings of $1.50 per share, up 11 cents from
the Zacks Consensus Estimate of $1.39 per share. Earnings increased
12% year over year.
Improved top line more than offset the increase in expense, driving
better-than-expected numbers in the quarter.
Including transaction and integration costs related to the proposed
acquisition of Coventry Health Care Inc. (CVH), of
8 cents and net realized capital gains of 6 cents, net income was
$1.48 per share, up 3% year over year.
Aetna’s total revenue for the reported quarter grew 7% year over
year to $9.5 billion, led by higher Health Care premiums in
Medicare and Medicaid businesses. Reported revenue was a tad lower
than the Zacks Consensus Estimate of $9.58 billion.
Operating expenses were $1.71 billion, up 4.4% year over year.
Operating expense ratio was 18% compared with 18.8% in the
prior-year quarter.
Pre-tax operating margin was 9% for the reported quarter, up 40
basis points year over year.
Segmental Performance
Aetna’s Health Care segment recorded revenues of
$8.79 billion, up 7% year over year.
Total medical membership was 18.295 million as of Mar 31, 2013.
This is a sequential increase of 159,000 prior to a reduction of
about 106,000 Medicaid members due to the previously announced sale
of Missouri Care. It increased 486,000 year over year prior to the
Missouri Care sale.
Operating earnings increased by 5% year over year to $492.8
million, largely attributable to higher underwriting margins in our
Commercial business.
Aetna’s Group Insurance revenues climbed 9% year
over year to $581.3 million.
The segment’s operating earnings decreased by 23.7% year over
year to $31.2 million reflecting higher operating expenses to
support growth in life and disability products.
At Large Case Pensions, revenues slipped 0.7% year
over year to $130.7 million.
Operating earnings increased by 6.9% year over year to $6.2
million.
Dividend and Share Repurchase Update
In the reported quarter, Aetna spent $184.1 million to buyback 3.7
million shares.
It had spent $66 million in dividend.
2013 Guidance
Aetna projected operating earnings per share in a range of $5.50 to
$5.60 for 2013, up from $5.40 guided earlier.
Medical membership is expected to increase to 18.4 million by end
of 2013.
Our Take
The quarter performed better than expected with strong growth in
membership, revenues increasing year over year and effective
reduction in operating expense ratio. The quarter marked the fourth
consecutive quarter of medical membership growth driven by strong
growth in Medicare business.
We expect favorable performance from Aetna going forward. The
company has made considerable investments in products and
technology, with intention to extend its core health business and
to capitalize on exciting new consumer and provider opportunities
emerging in the marketplace.
Aetna's strong operating results and significant capital generation
will allow it to make further investments. We expect the company to
continue performing well in 2013 backed by the performance of the
Medicaid and Medicare segments, fast growing health services
segment and a strong balance sheet. It also enhanced shareholder
value via share buybacks and dividend payments.
Performance of Other Health Insurers
Molina Healthcare, Inc. (MOH), reported
first-quarter 2013 net earnings per share of 64 cents,
significantly surpassing the Zacks Consensus Estimate of 26 cents
and the year-ago earnings of 39 cents.
WellPoint Inc. (WLP) reported first-quarter 2013
adjusted income of $2.94 per share, beating the Zacks Consensus
Estimate of $2.37 as well as the year-ago earnings of $2.34 per
share.
Zacks Rank
Aetna currently retains a Zacks Rank #3 (Hold).
AETNA INC-NEW (AET): Free Stock Analysis Report
COVENTRY HLTHCR (CVH): Free Stock Analysis Report
MOLINA HLTHCR (MOH): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
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