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Aetna (AET) Tops Q3 Earnings; Government Business Excels
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Health insurer Aetna Inc. reported third-quarter 2016 earnings of $2.07 per share, surpassing the Zacks Consensus Estimate of $2.02. Earnings were also up 9% year over year. The earnings upside came primarily from higher fees and other revenue in Aetna's Health Care segment and lower general and administrative expenses.
Aetna posted operating revenues of $15.74 billion, a tad below the Zacks Consensus Estimate of $15.76 billion but was up 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 Aetna's Commercial Insured products.
Adjusted operating expenses of $2.8 billion were almost unchanged year over year due to cost management initiatives.
The adjusted operating expense ratio was 17.6%, down from 18.6% in the year-ago quarter. The reduction in operating expense ratio was due to an increase in revenue and decrease in operating expenses following the execution of Aetna's expense management initiatives.
Third-quarter pretax operating margin was 8.5%, up slightly from 8.4% in the year-ago quarter.
Medical membership at Sep 30, 2016 increased by 143,000 from Jun 30, 2016, primarily reflecting increases in Aetna's Commercial ASC products.
Segmental Performance
Aetna’s Health Care segment recorded operating revenues of $15.1 billion, up 5.6% year over year. The increase was primarily backed by 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 11.4% from the year-ago quarter to $752.5 million.
Aetna’s Group Insurance operating revenues were up by just 0.3% year over year to $616.1 million. Operating earnings decreased 25.3% year over year to $19.9 million due to higher operating expenses and lower net investment income.
At Large Case Pensions, operating revenues were down 1.8% year over year to $67 million. Operating earnings were up 13.6% year over year to $5 million.
Financial Position
Total debt to consolidated capitalization ratio was 53.1% at Sep 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 57 days at Sep 30, 2016, reflecting a sequential increase of less than one day and a three-day increase compared with Sep 30, 2015.
Another company UnitedHealth Group Inc. (UNH - Free Report) also beat on third-quarter earnings.
Among the other healthcare players yet to come up with their earnings releases, you may consider the following. Our model shows that these have the right combination of elements to post an earnings beat this quarter:
Rigel Pharmaceuticals, Inc. (RIGL - Free Report) has an Earnings ESP of +12.5% and a Zacks Rank #3. The company is expected to report third-quarter earnings results on Nov 1.
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Aetna (AET) Tops Q3 Earnings; Government Business Excels
Health insurer Aetna Inc. reported third-quarter 2016 earnings of $2.07 per share, surpassing the Zacks Consensus Estimate of $2.02. Earnings were also up 9% year over year. The earnings upside came primarily from higher fees and other revenue in Aetna's Health Care segment and lower general and administrative expenses.
Aetna posted operating revenues of $15.74 billion, a tad below the Zacks Consensus Estimate of $15.76 billion but was up 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 Aetna's Commercial Insured products.
Adjusted operating expenses of $2.8 billion were almost unchanged year over year due to cost management initiatives.
The adjusted operating expense ratio was 17.6%, down from 18.6% in the year-ago quarter. The reduction in operating expense ratio was due to an increase in revenue and decrease in operating expenses following the execution of Aetna's expense management initiatives.
Third-quarter pretax operating margin was 8.5%, up slightly from 8.4% in the year-ago quarter.
Medical membership at Sep 30, 2016 increased by 143,000 from Jun 30, 2016, primarily reflecting increases in Aetna's Commercial ASC products.
Segmental Performance
Aetna’s Health Care segment recorded operating revenues of $15.1 billion, up 5.6% year over year. The increase was primarily backed by 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 11.4% from the year-ago quarter to $752.5 million.
Aetna’s Group Insurance operating revenues were up by just 0.3% year over year to $616.1 million. Operating earnings decreased 25.3% year over year to $19.9 million due to higher operating expenses and lower net investment income.
At Large Case Pensions, operating revenues were down 1.8% year over year to $67 million. Operating earnings were up 13.6% year over year to $5 million.
Financial Position
Total debt to consolidated capitalization ratio was 53.1% at Sep 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 57 days at Sep 30, 2016, reflecting a sequential increase of less than one day and a three-day increase compared with Sep 30, 2015.
AETNA INC-NEW Price and EPS Surprise
AETNA INC-NEW Price and EPS Surprise | AETNA INC-NEW Quote
Other Stocks
Aetna carries a Zacks Rank #3 (Hold).
Another company UnitedHealth Group Inc. (UNH - Free Report) also beat on third-quarter earnings.
Among the other healthcare players yet to come up with their earnings releases, you may consider the following. Our model shows that these have the right combination of elements to post an earnings beat this quarter:
Tenet Healthcare Corp. (THC - Free Report) is slated to report third-quarter earnings results on Oct 31. It has an Earnings ESP of +26.32% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rigel Pharmaceuticals, Inc. (RIGL - Free Report) has an Earnings ESP of +12.5% and a Zacks Rank #3. The company is expected to report third-quarter earnings results on Nov 1.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>