Back to top

Image: Bigstock

Aetna (AET) Earnings Beat, Revenues Miss Estimates in Q1

Read MoreHide Full Article

Health insurer Aetna Inc.’s first-quarter 2017 earnings of $2.71 per share surpassed the Zacks Consensus Estimate of $2.36 and also grew 17% year over year. In spite of higher costs associated with the termination of merger agreement with Humana Inc. (HUM), Aetna displayed bottom-line improvement due to increasing investment in growth initiatives.

 

 

Operational Update

Total revenue of $15.2 billion missed the Zacks Consensus Estimate of $15.47 billion by approximately 2%. Revenues also declined 3.2% year over year due to lower premiums in Aetna's Health Care segment.

Total company expense ratiodeteriorated 720 basis points (bps) from the prior-year quarter was 25.4% in the first quarter, primarily due to costs associated with the termination of the merger agreement with Humana during the quarter.

Adjusted expense ratioimproved 200 bps over the year-ago quarter to 16.0% in the first quarter, primarily due to the temporary suspension of the HIF in 2017 and the execution of Aetna's expense-management initiatives.

First-quarter pre-tax operating margin was 10%, up 50 bps year over year. The upside was primarily driven by strong performance in Aetna's Health Care segment despite continued pressure in Aetna's individual Commercial products

Medical membership totaled 22.4 million as of Mar 31, 2017, down 2.4% year over year.

Segmental Performance Update

Health Care segment

Aetna’s Health Care segment recorded both total revenue and adjusted revenues of $14.8 billion, down 1.3% year over year. The downside primarily stemmed from lower membership in Aetna's ACA compliant individual and small group products and  temporary suspension of the HIF in 2017. This was somewhat offset by higher premium yields in Aetna's Commercial business and membership growth in Aetna's Government business.

Pre-tax adjusted earningswere relatively flat with the prior-year quarter at approximately $1.5 billion. Aetna's first-quarter results reflect strong performance across all of its Health Care businesses, with the exception of individual commercial products.

Group Insurance

Total revenue of $621 million for the first quarter inched up 1.5% year over year. Adjusted revenues were $619 million, up 1.6% year over year. Total revenue and adjusted revenues increased primarily due to higher premiums in Aetna's life and disability products and increased net investment income.

Pre-tax adjusted earnings were $33 million for the first quarter, up 32% year over year, primarily due to higher net investment income.

Large Case Pensions

Total revenue of $86 million in the first-quarter grew 28% year over year. Adjusted revenue of $86 million also increased 32% over the year-ago quarter. Total revenue and adjusted revenue increased primarily due to higher net investment income.

Pre-tax adjusted earningswere $4 million in the first quarter as against $1 million in the year-ago quarter.

Financial Position

Total assets were $56.3 billion as of Mar 31, 2016, down 19% over the prior-year quarter.

Total debt-to-consolidated capitalization ratiowas 39.8% as of Mar 31, 2017, down 1380 bps from 53.6% at year-end 2016. This reflects the redemption of $10.2 billion aggregate principal amount of the senior notes issued in 2016, $750 million aggregate principal amount of senior notes due in 2020 and the repayment at maturity of $383 million aggregate principal amount of senior notes, each during the first quarter.

Guidance

The company expects 2017 operating earnings to be in the range of $8.80 to $9.00.

Aetna Inc. Price, Consensus and EPS Surprise

 

Aetna Inc. Price, Consensus and EPS Surprise | Aetna Inc. Quote

Zacks Rank and Performance of Other Insurers

Aetna presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among the other firms in the medical sector that have reported their first-quarter earnings so far, the bottom line at Centene Corp. (CNC - Free Report) , Quest Diagnostics Incorporated (DGX - Free Report) and UnitedHealth Group Inc. (UNH - Free Report) beat their respective Zacks Consensus Estimate.

5 Trades Could Profit "Big-League" from Trump Policies

If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.

Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


UnitedHealth Group Incorporated (UNH) - free report >>

Quest Diagnostics Incorporated (DGX) - free report >>

Centene Corporation (CNC) - free report >>

Published in