U.S. health insurer Aetna Inc. ( AET )
reported its third quarter 2012 earnings of $1.55 per share, way
ahead of the Zacks Consensus Estimate of $1.34 per share. Earnings
also increased 11% year over year.
The better-than-expected earnings of the company were the results
of revenue growth, higher underwriting margins, increased
membership coupled with lower operating costs.
Aetna's total revenue for the reported quarter grew 6% year over
year to $8.9 billion, led by higher Health Care premiums in each of
the company's Commercial, Medicare as well as Medicaid businesses.
Reported revenue was in line with the Zacks Consensus
Estimate.
Operating expenses were $1.64 billion, down 9.7% year over year.
Operating expense ratio was 18.3 % compared with 20.0% in the
prior-year quarter.
Pre-tax operating margin was 10.2 % for the reported quarter, down
50 basis points year over year.
Segment Performance
Aetna's Health Care segment recorded revenues of $8.24 billion, up
5.9% year over year. Total premium increased 7.0% year over year to
$7.2 billion, primarily attributable to an increase in Medicare
premium and higher Commercial premium yields.
Total medical membership increased by 149,000 sequentially to
18.178 million following the acquisition of Genworth Financial's
Medicare Supplement business.
The company's Group Insurance revenues climbed 8.5% year over year
to $530.8 million. The segment's operating earnings plummeted 23%
year over year to $29.3 million.
At Large Case Pensions, revenues declined 3.3% year over year to
$123.9 million and operating earnings fell 16% year over year to
$3.7 million.
2012 Guidance Update
Following the better-than-expected performance, Aetna raised its
2012 earnings expectation to $5.10 from the earlier guidance range
of $5.00-$5.10 per share.
Our Take
Going forward, we expect Aetna to post favorable earnings. The
company has made considerable investments in products and
technology, with an intention to extend its core health business
and also to capitalize on exciting new consumer and provider
opportunities emerging in the marketplace.
Aetna's strong operating results and significant capital
generation will allow it to make further investments. We expect the
company to continue performing well in 2012 backed by the
performance of the Medicaid and Medicare segments, fast growing
health services segment and a strong balance sheet.
Last week, Aetna's peer UnitedHealth Group Inc. (
UNH )
reported its third quarter 2012 earnings of $1.50 per share,
significantly ahead of the Zacks Consensus Estimate of $1.31 per
share. Earnings also grew 9% year over year. Other peers
Cigna Corp. ( CI ),
WellPoint Inc. ( WLP ),
Humana Inc. ( HUM )
are expected to release their earnings soon.
Aetna currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Considering the fundamentals, we are also
maintaining our long-term Neutral recommendation on the
shares
AETNA INC-NEW (AET): Free Stock Analysis ReportCIGNA CORP (CI): Free Stock Analysis ReportHUMANA INC NEW (HUM): Free Stock Analysis
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