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Aetna (AET) Tops Q2 Earnings & Revenues, Guides for 2016

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Health insurer Aetna Inc. reported second-quarter 2016 earnings of $2.21 per share surpassing the Zacks Consensus Estimate of $2.11. Earnings were also up 8% year over year.

The upside was primarily driven by higher fees and other revenue in Aetna's Health Care segment and lower general and administrative expenses, partly offset by lower underwriting margins in Aetna's Health Care segment.

Behind the Headlines

Aetna’s operating revenues of $15.89 billion beat the Zacks Consensus Estimate of $15.74 billion and increased 5% year over year. Revenue growth was primarily led by higher Health Care premium yields and membership growth in Aetna's Government business, partially offset by membership declines in Commercial Insured products.

Total operating expenses were $2.8 billion, down 0.6% year over year primarily due to lower general and administrative costs.

The adjusted operating expense ratio was 17.1%, down from 18.3% in the year-ago quarter. The reduction in operating expense ratio was due to the increase in revenue and decrease in operating expenses following the execution of Aetna's expense management initiatives.

Second-quarter pretax operating margin was 8.9%, almost unchanged from 8.8% in the year-ago quarter.

Aetna ended the quarter with medical memberships of 23 million.

Segmental Performance

Aetna’s Health Care segment recorded operating revenues of $15.2 billion, up 5.6% year over year. The increase in both total revenue and operating revenue was primarily due to higher premium yields and membership growth in Aetna's Government business. This was somewhat offset by membership losses in Aetna’s Commercial insurance business.
Operating earnings increased 8.9% from the year-ago quarter to $771 million.

Aetna’s Group Insurance operating revenues was up by just 0.2% year over year to $630 million. Operating earnings increased 11.4% year over year to $49.9 million.

At Large Case Pensions, operating revenues plummeted 13.6% year over year to $78 million due to a decline in investment income. Operating earnings were also down by 29% to $4.4 million.

Financial Position

Total debt to consolidated capitalization ratio was 53.8% as of Jun 30, 2016, compared with 32.6% at Dec 31, 2015, due to the issuance of $13 billion of senior notes to partially fund the proposed acquisition of Humana.

Days claims payable was 56.2 at Jun 30, 2016, reflecting a sequential decline of 1.1 days and a 4.4-day increase from Jun 30, 2015.

2016 Guidance

Aetna expects full-year earnings in the range of $7.90 to $8.10 per share.

AETNA INC-NEW Price, Consensus and EPS Surprise

AETNA INC-NEW Price, Consensus and EPS Surprise | AETNA INC-NEW Quote

Other Stocks

Aetna carries a Zacks Rank #2 (Buy). Among the other multi line insurers that have reported their second-quarter earnings results so far, the bottom line at Anthem Inc. , Centene Corp. (CNC - Free Report) and UnitedHealth Group Inc. (UNH - Free Report) beat their Zack Consensus Estimate.

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