) reported first-quarter 2014 earnings of $1.98 per share,
handily beating the Zacks Consensus Estimate of $1.56. Earnings
also grew 27% year over year. Better-than-expected earnings came
on the back of higher underwriting margins in Aetna's Health Care
business and accretion from the Coventry acquisition.
Including one-time items, net income came in at $1.82 per
share, up 23% year over year.
Total revenue grew significantly by 47% year over year to
$14.0 billion, led by higher Health Care premiums from the
acquisition of Coventry as well as increased membership in Health
Care business. Reported revenues also topped the Zacks Consensus
Estimate of $13.8 billion.
Operating expense ratio declined 20 basis points year over
year to 17.8%. The improvement came on the back of operating
revenue growth from the acquisition of Coventry and continued
execution of the company's expense management
Aetna ended the first quarter with record medical membership
of nearly 22.7 million, up 529,000 sequentially.
Inclusion of Coventry revenues, pricing action undertaken by
the company as well as growth in Medicare membership drove 50%
year-over-year top-line growth in Aetna's
segment which recorded revenues of $13.2 billion. Operating
earnings increased by 40.0% year over year to $719.0 million, due
to earnings accretion from Coventry, along with higher
underwriting margins in its Commercial business as well as
revenues climbed 5% year over year to $612.0 million. Higher
margins in the company's Disability insurance business led to a
29% year-over-year improvement in operating earnings to $41.2
Large Case Pensions
, revenues increased 4.1% year over year to $136.0 million.
Operating earnings however, fell 23% year over year to $4.8
Share Repurchase and Dividend Update
In the reported quarter, Aetna spent $465 million in share
repurchases and returned $82 million in quarterly dividends to
2014 Guidance Raised
With solid earnings boosting confidence, management pulled up
its earnings guidance for 2014 to $6.35-$6.55 per share. Aetna
had earlier announced its expectations of earning a minimum of
$6.25 per share in 2014.
Aetna also expects to earn revenues in the range of $56 to $57
billion, higher than the previous estimation of $54 billion. The
company also hopes to include 0.8 to 1.0 million members in 2014.
Aetna's stellar results reported during the quarter reinforce
our confidence in the company which had earlier given a cautious
outlook for 2014 amid the current tough operating environment.
We expect the company to maintain its earnings trends given
its diversified portfolio, continued progress in integrating the
Coventry acquisition, pricing discipline and solid execution. We
also expect the company to gain on membership enrollment in its
Commercial as well as Government business. The recently completed
acquisition of InterGlobal is also expected to accrue to earnings
going forward. Further, strong capital management will also aid
the bottom line.
Among other health insurers,
UnitedHealth Group Inc.
) reported its first quarter results beating the Zacks Consensus
Estimate by a penny. Other players like
) are expected to release their first quarter earnings on April
30 and May 1, respectively.
AETNA INC-NEW (AET): Free Stock Analysis
CIGNA CORP (CI): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis
WELLPOINT INC (WLP): Free Stock Analysis
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