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Aetna, Inc. (AET)

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We reiterate our outperform rating on Aetna Inc. (AET) prior to the release of its first-quarter earnings scheduled on April 25, 2012, to reflect its better-than-average operating fundamentals and expected strong performance in 2012.

The company ended the year 2011 with better performances, demonstrating growth in membership, revenues, operating margins and cash flow on the back of low medical utilization, pricing discipline, medical cost management strategies and cost controls. In 2011, the company made strategic investments in acquisitions and technologies, with the intent to extend its core health business and also to capitalize on exciting new consumer as well as provider opportunities emerging in the marketplace.

Aetna's strong operating results and significant capital generation will allow it to continue investing for the future. We expect the company to keep performing better in 2012. The Zacks Consensus estimates earnings of $1.39 per share for first quarter 2012, which translates into an expected earnings growth of 10.5% year over year.

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