Aetna Reports First Quarter Earnings; Operating Earnings Up 15% on Strong Revenue Growth of 23%; Company Exceeds First Call Consensus.HARTFORD Hartford, city (1990 pop. 139,739), state capital, Hartford co., central Conn., on the west bank of the Connecticut River; settled as Newtown 1635–36 on the site of a Dutch trading post (1633; abandoned 1654), inc. 1784. , Conn.--(BUSINESS WIRE)--April 28, 1999-- Aetna Aetna, volcano: see Etna, Italy. (NYSE NYSE See: New York Stock Exchange :AET AET Aetna, Inc. AET After Extra Time AET Actual Evapotranspiration AET Alliance for Environmental Technology AET Alpha-Ethyltryptamine AET Applied Extrusion Technologies, Inc. ) today announced first quarter 1999 operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before (1) of $168.2 million, or $1.08 per common share, an increase of 15 percent over the $146.6 million, or $0.90 per common share, reported in the first quarter of 1998. First quarter 1999 operating earnings were $.07 above First Call analyst consensus estimates of $1.01 per common share. "First quarter results again demonstrate strong growth in all three core businesses, reflecting our intensified in·ten·si·fy v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: focus on operational excellence with the goal of producing consistent revenue and earnings growth," said Aetna Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a L. Huber Huber may refer to:
"In health care, our intensified focus produced solid results. We added 349,000 HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, members since year end, achieved higher premiums, and continued efforts to manage operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. and growth in medical costs. "In retirement services, our aggressive sales strategy continued to produce marketplace wins in the government sector and other markets. "During the quarter, we purchased one of the largest, private health care companies in Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. and launched our pension joint venture in Poland Poland, Pol. Polska, officially Republic of Poland, republic (2005 est. pop. 38,635,000), 120,725 sq mi (312,677 sq km), central Europe. It borders on Germany in the west, on the Baltic Sea and the Kaliningrad region of Russia in the north, on Lithuania, , further extending our business reach. Additionally, we recently announced an agreement to sell our Canadian business Canadian Business is the longest-publishing business magazine in Canada. It was founded in 1928 as The Commerce of the Nation, the organ of the Canadian Chamber of Commerce. The magazine was renamed Canadian Business in 1933. , in keeping with our strategy of focusing our resources on the high-growth potential of emerging markets, where we continue to see opportunity. "Consistent with our goal of producing shareholder value, we lowered corporate expenses over last year and continued our share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program during the quarter, buying back nearly a half-million shares," Huber said. Aetna U.S. Healthcare U.S. Healthcare is a now-defunct healthcare company. The logo had an apple. The merger with Aetna In 1996, the company merged with Aetna, calling it Aetna U.S. Healthcare. The U.S. Healthcare apple logo was next to the Aetna name, and U.S. Healthcare under it. U.S. Earnings Rise 33 Percent Aetna U.S. Healthcare, which provides a full spectrum of managed care, indemnity Recompense for loss, damage, or injuries; restitution or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. , and group insurance products and services, reported a 33 percent increase in operating earnings for the 1999 first quarter. Operating earnings, before Year 2000 costs, were $133.5 million, compared to $100.5 million in the prior-year period, due to improved HMO results and the inclusion of the NYLCare business. First quarter 1999 operating earnings were nearly 9 percent higher than the $122.6 million reported for the 1998 fourth quarter. The 1999 first quarter commercial HMO medical loss ratio (MLR MLR mixed lymphocyte reaction. MLR Myocardial laser revascularization, see there ) of 82.0 percent improved over the prior-year period MLR of 82.7 percent, as higher premiums offset increases in medical costs and the company benefited from a focused, market-by-market approach to addressing medical cost increases. In particular, the company's pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. initiatives helped to curb rising pharmacy costs at a rate below current industry trends. The commercial HMO MLR in the first quarter of 1999 improved sequentially over the 82.3 percent reported in the fourth quarter last year. The MLR in the Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. HMO business in the 1999 first quarter was 90.1 percent, a substantial improvement over the 92.8 percent MLR in the prior-year period and the 92.6 percent MLR for the fourth quarter of 1998. The reduction in the Medicare MLR was primarily due to the company's exiting of selected markets as of January January: see month. 1, 1999. During the 1999 first quarter, HMO membership increased by nearly 1.9 million members over the prior-year period, reflecting the addition of NYLCare, as well as business growth. Commercial HMO membership rose 5 percent from year end, as enrollment grew in every region of the country. The company added 62,000 Medicare HMO members since year end, resulting in a net increase of 11,000 Medicare members after exiting selected markets. First quarter HMO SG&A expenses as a percent of revenue improved to 11.0 percent, with the company continuing efforts to maintain expenses while increasing revenues. Operating earnings in the Group Insurance and Other Health business were slightly lower in the first quarter. The NYLCare integration remains on track, and the company is proceeding with preliminary planning for the integration of the Prudential Prudential is the name of two different companies and buildings named after them: Companies:
The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. and state regulators, and the transaction is currently expected to close in the second quarter. Aetna Retirement Services Records 30 Percent Earnings Growth Aetna Retirement Services (ARS ARS In currencies, this is the abbreviation for the Argentine Peso. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ), which markets a wide array of retirement and investment products to nonprofit organizations Nonprofit Organization An association that is given tax-free status. Donations to a non-profit organization are often tax deductible as well. Notes: Examples of non-profit organizations are charities, hospitals and schools. , government entities, small businesses and individuals, reported first quarter 1999 operating earnings, before Year 2000 costs, of $53.0 million. Earnings for the first quarter represent a 30 percent increase over the $40.8 million reported in the prior-year period. This comparison excludes 1998 results from the individual life business that the company sold in October October: see month. of last year. First quarter 1999 results are due to continued strong market performance, as well as business growth. ARS assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. grew year over year by 21 percent to $55 billion, driven by the continued strength in equity markets, as well as sales growth. Assets under management were up 6 percent over the 1998 fourth quarter. Aetna International Earnings Up 22 Percent Aetna International, which primarily sells life insurance, health and financial retirement services products in targeted emerging markets in 16 countries, reported first quarter 1999 operating earnings, before Year 2000 costs, of $45.6 million, a 22 percent increase over the $37.5 million reported in the first quarter of 1998. Growth in the international business for the first quarter was driven by strong performance in the Mexican insurance Mexican insurance provides coverage for tourists when they are driving in the Republic of Mexico. This type of insurance was created because U.S. insurance policies are not recognized by authorities in Mexico in the event of an accident. business, Chile, Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. and Taiwan Taiwan (tī`wän`), Portuguese Formosa, officially Republic of China, island nation (2005 est. pop. 22,894,000), 13,885 sq mi (35,961 sq km), in the Pacific Ocean, separated from the mainland of S China by the 100-mi-wide (161-km) Taiwan . Results also reflect the weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. of foreign currencies, particularly
the Brazilian real The real (IPA: [xe'aw] or [ʁe'aɫ], symbol: R$, ISO 4217 code: BRL, plural: reais) is the currency of Brazil. It is also the name of the earliest Brazilian currency (see from the Colonial period to 1942. . The company continues to monitor the ongoing impact
of global economic conditions in Brazil and other local markets.Total Aetna Revenues, including net realized capital gains or losses capital gains or losses n. particularly when calculating the tax liability of an individual or business, this is the difference between the original cost plus the cost of capital improvements, excluding maintenance, called "basis" and the sales price. , for the first quarter of 1999, grew 23 percent, primarily due to the NYLCare acquisition. First quarter 1999 total revenues were $5.7 billion, up from $4.6 billion during the prior-year period. Net Income for the 1999 first quarter increased 7 percent to $179.4 million, or $1.16 per common share, including $11.2 million of net realized capital gains. This compares to $167.5 million, or $1.05 per common share, in the 1998 first quarter, which included $20.9 million in net realized capital gains. Certain information contained in this press release is forward looking, including Aetna's expectations regarding the Prudential acquisition. That information is based on management's estimates, assumptions and projections and is subject to significant uncertainties, many of which are beyond Aetna's control. Important risk factors could cause Aetna's actual future results and other future events to differ materially from those currently estimated by management. Those risk factors include, but are not limited to, the ability to successfully close and integrate the Prudential health transaction on a timely basis and in a cost-efficient manner (which also is affected by the timing of numerous required regulatory approvals, the ability to eliminate duplicative du·pli·cate adj. 1. Identically copied from an original. 2. Existing or growing in two corresponding parts; double. 3. administrative functions and the ability to integrate management information systems), as well as the completion of the NYLCare integration, adverse government regulation (particularly in key markets where Prudential HealthCare operates), unanticipated increases in medical costs, including those resulting from changes in contracting or recontracting with providers, adverse pricing actions by government payors, changes in size and product mix of membership in key markets, Year 2000 issues, the effect of interest rate changes on financing costs, and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. . For a discussion of these and other important risk factors that may materially affect Aetna, its businesses or the forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. made in this press release, please refer to the discussion of risk factors contained in Aetna's 1998 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the Securities and Exchange Commission (SEC), and Aetna's 1998 Annual Report to Shareholders. You also should read these reports and Aetna's Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended March 31, 1999, filed with the SEC for detailed discussions of Aetna's results of operations and financial condition. Information about Aetna earnings is available at http://www.aetna.com. (1) Operating earnings exclude net realized capital gains or losses and include after-tax Year 2000 costs ($26.9 million and $16.3 million in 1999 and 1998, respectively). First quarter 1998 results include $23.0 million in operating earnings from the domestic individual life business, which was sold on October 1, 1998. -0-
Consolidated Statements of Income
(Millions, except share and per common share data)
3 Months Ended March 31,
1999 1998
Revenue:
Premiums $ 4,381.4 $ 3,238.6
Net investment income 740.7 812.7
Fees and other income 556.9 550.5
Net realized capital gains 17.1 31.7
Total revenue 5,696.1 4,633.5
Benefits and expenses:
Current and future benefits 4,135.0 3,270.6
Operating expenses (1) 1,038.8 878.2
Interest expense 64.6 56.9
Amortization of goodwill and other
acquired intangible assets 107.7 96.2
Amortization of deferred policy
acquisition costs 50.0 52.4
Total benefits and expenses 5,396.1 4,354.3
Income before income taxes 300.0 279.2
Income taxes 120.6 111.7
Net income 179.4 167.5
Less: preferred stock dividends 13.8 13.9
Net income applicable to common ownership $ 165.6 $ 153.6
Shareholders' equity $ 11,303.2 $ 11,358.1
(1) Includes Year 2000 costs (pretax) of $41.3 million and $25.6
million, for the three months ended March 31, 1999 and 1998,
respectively.
Consolidated Statements of Income (Continued)
3 Months Ended March 31,
1999 1998
Results per common share:
Operating earnings excluding
unusual item: (1)(2)(3)
Basic $ 1.28 $ 1.02
Assuming dilution $ 1.27 $ 1.01
Operating earnings including
unusual item - assuming
dilution (1)(2)(3) $ 1.08 $ .90
Net income - assuming dilution $ 1.16 $ 1.05
Common shareholders' equity $ 74.06 $ 72.13
Common stock dividends $ .20 $ .20
Weighted average common shares
- basic 141,370,595 145,600,061
Weighted average common shares and
common share equivalents (4) 142,573,185 146,820,520
(1) Operating earnings for the three months ended March 31, 1999
include NYLCare health business earnings and interest expense related
to funding the transaction.
(2) Unusual item includes Year 2000 costs related to all segments
for the three months ended March 31, 1999 and 1998.
(3) Individual Life Business was sold on October 1, 1998.
(4) Weighted average common shares and common share equivalents
include the effect of dilutive stock options and stock-based awards
and the effect of potentially dilutive conversions of preferred stock,
where appropriate. Actual common shares outstanding at March 31, 1999
and 1998 were 141.0 million and 145.5 million, respectively. In
addition, 11.6 million and 11.7 million shares of mandatorily
convertible preferred stock were outstanding at March 31, 1999 and
1998, respectively.
Additional information about the Company's results is published
in the 1999 First Quarter Financial Supplement available from Robyn S.
Walsh, Investor Relations, (860) 273-6184, in the Company's 1999 Form
10-Q to be filed with the Securities and Exchange Commission, or is
available from our Web site, http://www.aetna.com.
Segment Information(1)(2)
(Millions)
3 Months Ended March 31,
1999 1998
Aetna U.S. Healthcare:
Revenue $ 4,445.1 $ 3,311.7
Operating earnings excluding
unusual item $ 133.5 $ 100.5
Year 2000 costs (17.5) (8.8)
Operating earnings $ 116.0 $ 91.7
Aetna Retirement Services:
Revenue - Financial Services $ 370.7 $ 336.0
Revenue - Individual Life (3) $ -- $ 134.6
Operating earnings excluding
unusual item:
Financial Services $ 53.0 $ 40.8
Individual Life (3) -- 23.0
Year 2000 costs (5.7) (4.1)
Operating earnings $ 47.3 $ 59.7
Aetna International:
Revenue $ 570.2 $ 469.5
Operating earnings excluding
unusual item $ 45.6 $ 37.5
Year 2000 costs (2.6) (1.7)
Operating earnings $ 43.0 $ 35.8
Large Case Pensions:
Revenue $ 289.7 $ 348.3
Operating earnings excluding
unusual item $ 22.5 $ 22.6
Year 2000 costs (.2) (.1)
Operating earnings $ 22.3 $ 22.5
Corporate:
Interest $ (40.6) $ (35.2)
Other (19.5) (26.3)
Reinvestment of Life Proceeds .6 --
Operating expenses excluding
unusual item (59.5) (61.5)
Year 2000 costs (.9) (1.6)
Net operating expenses $ (60.4) $ (63.1)
Total Company:
Operating earnings excluding
unusual item $ 195.1 $ 162.9
Year 2000 costs (26.9) (16.3)
Operating earnings 168.2 146.6
Net realized capital gains 11.2 20.9
Net income $ 179.4 $ 167.5
(1) All amounts, except revenue, are presented net of taxes. Revenue
and operating earnings exclude net realized capital gains or
losses.
(2) Operating earnings for the three months ended March 31, 1999
include NYLCare health business earnings in the Aetna U.S.
Healthcare segment and interest expense related to funding the
transaction in the Corporate segment.
(3) The sale of the Individual Life Business occurred on October 1,
1998.
Aetna U.S. Healthcare Enrollment and Other Statistics
(Thousands)
% Change From:
March December March December March
31, 31, 31, 31, 31,
1999 (1) 1998 (1) 1998 1998 1998
Membership by Product:
HMO - Risk
Commercial 5,344 5,104 3,851 4.7 38.8
Medicare 546 535 399 2.1 36.8
Medicaid 140 132 94 6.1 48.9
HMO - Nonrisk 730 640 539 14.1 35.4
Total HMO 6,760 6,411 4,883 5.4 38.4
POS 2,680 2,770 2,801 (3.2) (4.3)
PPO 3,887 4,032 3,465 (3.6) 12.2
Total Managed
Care Membership 13,327 13,213 11,149 .9 19.5
Indemnity 2,238 2,452 2,506 (8.7) (10.7)
Total Health
Membership 15,565 15,665 13,655 (.6) 14.0
Total Group
Insurance 12,462 12,452 12,352 .1 .9
Three Months Ended
March 31, December 31, March 31,
1999 1998 1998
Commercial HMO Medical Loss Ratio 82.0% 82.3% 82.7%
Medicare HMO Medical Loss Ratio 90.1% 92.6% 92.8%
Health Risk Medical Loss Ratio 84.9% 85.9% 85.2%
(1) Health membership for NYLCare at the date of acquisition (July
15, 1998) in thousands was 2,117 members, including 1,186
Commercial HMO Risk, 111 Medicare HMO Risk, 56 Medicaid HMO
Risk, 135 HMO nonrisk, 452 PPO risk and 177 PPO nonrisk. Group
Insurance NYLCare membership at the date of acquisition was 791
thousand members.
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