Aetna Reports First Quarter Results.Business Editors 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 29, 2004 -- First-quarter 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 of $1.92 per share -- First-quarter operating earnings, excluding favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. reserve development, of $1.75 per share, compared with Thompson/First Call mean of $1.72, a 31 percent increase over prior-year quarter -- First quarter net income of $2.28 per share -- Medical membership increase of 342,000 from year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2003 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 operating earnings of $1.92 per share. Operating earnings, excluding favorable reserve development, were $1.75 per share, an increase of 31 percent compared to the prior year. This increase primarily reflects growth in revenues in part from increased medical membership, solid underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. results, and reduced 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. . Net income for the quarter was $2.28 per share compared to $2.12 in the prior-year period. Operating earnings exclude net realized capital gains.(1) "This quarter marks the achievement of two very significant milestones in Aetna's turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. : top-line revenue growth and membership growth," said John W. Rowe, M.D., 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. . "For the first time in the turnaround, our revenue increased, by 8 percent to $4.8 billion from the first quarter of 2003. Medical membership increased by 342,000, or 2.6 percent, to more than 13.3 million from December December: see month. 2003, reflecting both momentum in new customer sales and higher customer retention. We also experienced meaningful increases in membership in our dental dental /den·tal/ (den´t'l) pertaining to a tooth or teeth. den·tal adj. 1. Of, relating to, or for the teeth. 2. Of, relating to, or intended for dentistry. , 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. and group insurance products. Our comprehensive medical cost management programs and our ongoing operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. management efforts continue to have a favorable impact on our results. "With our strong first quarter performance, we reaffirm re·af·firm tr.v. re·af·firmed, re·af·firm·ing, re·af·firms To affirm or assert again. re our full-year operating earnings guidance of $6.60 to $6.75 per share."(2)
Quarterly Financial Results at a Glance
Three Months Ended
March 31, March 31, Change
2004 2003
Total revenues $4.8 billion $4.5 billion 8%
============ ============
Operating earnings(a) $308.8 million $315.9 million (2)%
============== ==============
Net income $365.8 million $330.0 million 11%
============== ==============
Per share results:
Operating earnings(a) $1.92 $2.03
Favorable development of
prior-period health
care cost estimates (0.17) (0.69)
------ ------
Operating earnings,
excluding development(a) $1.75 $1.34 31%
===== =====
Income from continuing
operations $2.03 $2.12
Income from discontinued
operations(b) 0.25 -- --
----- -----
Net income $2.28 $2.12 8%
===== =====
(a) For full description of operating earnings and per share
operating earnings, refer to footnote 1 at end of press release.
(b) Refer to footnote 3 at end of press release.
"We announced this quarter that Aetna will offer the new Medicare-approved prescription drug prescription drug Prescription medication Pharmacology An FDA-approved drug which must, by federal law or regulation, be dispensed only pursuant to a prescription–eg, finished dose form and active ingredients subject to the provisos of the Federal Food, Drug, discount card on a national basis and that we will improve our 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. Advantage offerings to be more competitive. "We also announced several new initiatives to reduce complexity for and improve communications with physicians, including a new information resource, a billing dispute mechanism, and dedicated service centers. And the National Advisory Committee of Practicing Physicians, recently formed as a direct result of our 'new era of cooperation' agreement with physicians, held its first meeting. "Finally, we announced Aetna Integrated Health and Disability, an industry-leading approach to the coordination coordination /co·or·di·na·tion/ (ko-or?di-na´shun) the harmonious functioning of interrelated organs and parts. co·or·di·na·tion n. 1. The harmonious adjustment or interaction of parts. and delivery of benefits across medical, disability, behavioral health Behavioral health was first used in the 1980's to name the combination of the fields mental health and substance abuse. As an example, an organization serving both mental health and substance abuse clients might refer to its practice as behavioral health or and pharmacy," Rowe said. "The execution of our strategy, which centers on a commitment to disciplined pricing to achieve profitable growth while focusing on the unique needs of each of our customer markets, is yielding positive results and contributing to solid top-line growth," said Ronald A. Williams, president. Health Care results Health Care, which provides a full range of insured The person who obtains or is otherwise covered by insurance on his or her health, life, or property. The insured in a policy is not limited to the insured named in the policy but applies to anyone who is insured under the policy. insured n. and self-insured self-insured Self fund Health insurance adjective Referring to the practice of carrying an individual health insurance policy for oneself; self insurance is usually more expensive than group insurance medical, dental, pharmacy and behavioral health products and services, reported: -- Operating earnings of $288.4 million in the first quarter of 2004, compared with $293.3 million in the first quarter of 2003. Excluding favorable reserve development of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $27 million after tax in the first quarter of 2004 and approximately $107 million after tax in the first quarter of 2003, operating earnings were $261.4 million in the first quarter of 2004 and $186.3 million in the first quarter of 2003. This increase was due to higher revenue in part from increased medical membership, solid underwriting results and a decrease in operating expenses. -- Net income of $295.5 million in the first quarter of 2004, compared with $301.9 million in the first quarter of 2003. -- A Commercial Risk Medical Cost Ratio (MCR MCR My Chemical Romance (band) MCR Minimum Capital Requirement MCR Minimum Cell Rate MCR Middle Common Room (UK universities) MCR Multivariate Curve Resolution ) of 77.6 percent in the first quarter of 2004, compared with 77.0 percent in the first quarter of 2003, excluding favorable reserve development in both periods, reflecting a slightly higher percentage increase in per-member medical costs over premiums. Including development, the Commercial Risk MCR was 76.6 percent in the first quarter of 2004 and 72.0 percent in the first quarter of 2003. -- A Medicare MCR of 86.6 percent in the first quarter of 2004, compared with 84.4 percent in the first quarter of 2003, excluding favorable reserve development in both periods, reflecting higher utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of health care services in the first quarter of 2004. Including development, the Medicare MCR was 84.5 percent in the first quarter of 2004, compared with 79.0 percent in the first quarter of 2003. -- Total medical membership of approximately 13.3 million at March 31, 2004, compared with 13.0 million at December 31, 2003, an increase of 2.6 percent. -- Total revenues in the first quarter of 2004 of $4.1 billion, compared with $3.8 billion in the first quarter of 2003. Group Insurance results Group Insurance, which includes Group Life, Disability and Long-Term Care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. products, reported: -- Operating earnings of $30.8 million in the first quarter of 2004, compared with $32.6 million in the first quarter of 2003. Operating earnings were lower because of a slightly higher benefit cost ratio and higher operating expenses offset in part by higher net investment income. -- Net income of $38.7 million in the first quarter of 2004, compared with $35.1 million in the first quarter of 2003. -- Total revenues in the first quarter of 2004 of $484.9 million, compared with $457.4 million in the first quarter of 2003, reflecting higher premiums associated with an increase in group life membership. Large Case Pensions results Large Case Pensions, which manages a variety of discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: and other retirement and savings products primarily for defined benefit and defined contribution plan Defined contribution plan A pension plan whose sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants. Related: Defined benefit plan customers, reported: -- Operating earnings of $6.1 million in the first quarter of 2004, compared with $6.8 million in the first quarter of 2003. -- Net income of $8.1 million in the first quarter of 2004, compared with $9.8 million in the first quarter of 2003. Total company results -- Total Revenues. Revenues were $4.8 billion in the first quarter of 2004, compared with $4.5 billion in the first quarter of 2003. The growth in revenue reflects both rate increases and a higher level of membership, which resulted in an increase of 9 percent in premiums and 8 percent in fees. -- Total Operating Expenses. Operating expenses, which include selling and general and administrative expenses, were $983.7 million in the first quarter of 2004, $36.7 million less than in the first quarter of 2003. General and administrative expenses declined by approximately $54 million due to ongoing expense initiatives, partially offset by approximately $18 million of increased selling expenses associated with membership growth. -- Corporate Interest expense was $16.5 million after tax in the first quarter of 2004, compared with $16.8 million in the first quarter of 2003. -- Net Income. Aetna reported net income of $365.8 million in the first quarter of 2004, compared with $330.0 million in the first quarter of 2003. -- Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: (4) improved to 10.0 percent in the first quarter of 2004, from 8.2 percent in the first quarter of 2003. The after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. operating margin, which represents income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the divided by total revenue, was 6.8 percent in the first quarter of 2004, compared with 7.4 percent in the first quarter of 2003. A live audio webcast of the first-quarter results conference call will begin at 8:30 a.m. ET today. The public may access the conference call through a live audio webcast available on Aetna's Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the Investor Information link at www.aetna.com. Financial, statistical and other information related to the conference call, including additional GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). reconciliations, will be available on Aetna's Investor Information site. The conference call also can be accessed by dialing 800-810-0924, or 913-981-4900 for international callers. The company suggests participants dial in approximately 10 minutes prior to the call. Individuals who dial in will be asked to identify themselves and their affiliations. A replay of the call may be accessed through Aetna's Investor Information link on the Internet at www.aetna.com or by dialing 888-203-1112, or 719-457-0820 for international callers. The replay access code is 413436. Telephone replays will be available from 11:30 a.m. ET on April 29 until midnight ET on May 6. Aetna is one of the nation's leading providers of health care, dental, pharmacy, group life, disability and long-term care benefits, serving approximately 13.3 million medical members, 11.2 million dental members, 8.1 million pharmacy members and 12.4 million group insurance customers, as of March 31, 2004. The company has extensive nationwide networks of more than 618,000 health care services providers, including over 370,000 primary care and specialist physicians and 3,783 hospitals. For more information about Aetna, please visit the company's web site at www.aetna.com. (1) Operating earnings exclude net realized capital gains from income from continuing operations. Although the excluded item may recur, management believes that operating earnings and operating earnings per share provide a useful comparison of its underlying business performance from period to period. Management uses operating earnings to assess business performance and to make decisions regarding its operations and allocation of resources allocation of resources Apportionment of productive assets among different uses. The issue of resource allocation arises as societies seek to balance limited resources (capital, labour, land) against the various and often unlimited wants of their members. among its businesses. Operating earnings is also the measure reported to the Chief Executive Officer for these purposes. Realized capital gains and losses arise from various types of transactions primarily in the course of managing a portfolio of assets that support the payment of liabilities, but these transactions do not directly relate to the underwriting or servicing of products for customers and are not directly related to the core performance of the company's business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets . The company also displays certain metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. (e.g., medical cost ratios, operating earnings, operating earnings per share and pretax operating margins) excluding changes to prior-period health care cost estimates. Each quarter, the Company re-examines previously established health care cost payable estimates based on actual claim submissions and other changes in facts and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . Decreases (increases) in prior periods' estimates represent the effect of favorable (unfavorable) development of prior period health care cost estimates on current period results of operations, at each financial statement date. The Company believes excluding changes to prior period health care cost estimates better reflects the underlying current-period health care costs. For a reconciliation of these items to financial measures calculated under accounting principles generally accepted in the United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, (GAAP), refer to the tables on pages 7 to 11 of this release. (2) Projected operating earnings per share for full year 2004 exclude $17.0 million of net realized capital gains for the first quarter of 2004 and any future 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. . The company is not able to project the amount of future net realized capital gains or losses and cannot therefore reconcile projected full year 2004 operating earnings to projected income from continuing operations. The projected operating earnings per share for full year 2004 also exclude approximately $27 million, after tax, of favorable development of prior-period health care cost estimates for the first quarter of 2004. (3) Income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of approximately $40 million for first quarter 2004 reflects the completion of certain Internal Revenue Service audits associated with businesses previously sold (former Aetna). (4) In order to provide useful information regarding profitability of the company on a basis comparable to others in the industry, without regard to financing decisions Financing decisions Decisions concerning the liabilities and stockholders' equity side of the firm's balance sheet, such as a decision to issue bonds. , income taxes and amortization of other acquired intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. (each of which may vary for reasons not directly related to performance of the underlying business), the company's pretax operating margin excludes interest expense, income taxes and amortization of other acquired intangible assets. Management also uses pretax operating margin to assess its performance, including performance versus competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. . Operating earnings used in the pretax margin calculation also exclude the items noted in footnote Text that appears at the bottom of a page that adds explanation. It is often used to give credit to the source of information. When accumulated and printed at the end of a document, they are called "endnotes." 1. For a reconciliation to margin calculated under GAAP, refer to the tables on page 10 of this release. ADDITIONAL INFORMATION; CAUTIONARY STATEMENT -- Certain information in this press release is forward looking, including, without limitation, the projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. of 2004 operating earnings. Forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information is based on management's estimates, assumptions and projections, and is subject to significant uncertainties and other factors, many of which are beyond Aetna's control. Important risk factors could cause 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: unanticipated increases in medical costs (including increased medical utilization, increased pharmacy costs, increases resulting from unfavorable changes in contracting or re-contracting with providers, changes in membership mix to lower-premium or higher-cost products or membership-adverse selection; as well as changes in medical cost estimates due to the necessary extensive judgment that is used in the medical cost estimation estimation In mathematics, use of a function or formula to derive a solution or make a prediction. Unlike approximation, it has precise connotations. In statistics, for example, it connotes the careful selection and testing of a function called an estimator. process, the considerable variability inherent in such estimates, and the sensitivity of such estimates to changes in medical claims payment patterns and changes in medical cost trends); decreases in membership or failure to achieve desired membership growth due to significant competition or other factors; increases in medical costs or Group Insurance claims resulting from any acts of terrorism terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. ; the ability to reduce administrative expenses while maintaining targeted levels of service and operating performance, and to improve relations with providers while taking actions to reduce medical costs; the ability to successfully implement Aetna's new operating model Operating Model is a term that is used in many contexts. In essence an operating model describes how an organization operates across both business and technology domains. The Operating Model describes what is important for the organization. to a projected growing membership base; lower levels of investment income from continued low interest rates; adverse government regulation (including legislative proposals or court decisions eliminating or reducing ERISA See Employee Retirement Income Security Act. ERISA See Employee Retirement Income Security Act (ERISA). pre-emption PRE-EMPTION, intern. law. The right of preemption is the right of a nation to detain the merchandise of strangers passing through her territories or seas, in order to afford to her subjects the preference of purchase. 1 Chit. Com. Law, 103; 1 Bl. Com. 287. 2. of state laws that would increase potential 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. exposure, and other proposals, such as patients' rights The legal interests of persons who submit to medical treatment. For many years, common medical practice meant that physicians made decisions for their patients. This paternalistic view has gradually been supplanted by one promoting patient autonomy, whereby patients and legislation, that would increase potential litigation exposure or mandate A judicial command, order, or precept, written or oral, from a court; a direction that a court has the authority to give and an individual is bound to obey. A mandate might be issued upon the decision of an appeal, which directs that a particular action be taken, or upon a coverage of certain health benefits); adverse pricing actions by government payors; changes in size, product mix and medical cost experience of membership in key markets; and the outcome, including any negotiated resolution, of various litigation and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. matters, including ongoing reviews of business practices by various regulatory agencies regulatory agency Independent government commission charged by the legislature with setting and enforcing standards for specific industries in the private sector. The concept was invented by the U.S. . For more discussion of important risk factors that may materially affect Aetna, please see the risk factors contained in Aetna's 2003 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. , on file with the Securities and Exchange Commission. You also should read Aetna's 2003 Annual Report on Form 10-K and Aetna's 2004 first quarter report on Form 10-Q Form 10-Q See 10-Q. when filed with the Securities and Exchange Commission for a discussion of Aetna's historical results of operations and financial condition.
Consolidated Statements of Income
($ in Millions)
Three Months Ended
-------------------
March 31, March 31,
2004 2003
--------- ---------
Revenue:
Health care premiums $3,557.8 $3,269.0
Other premiums 442.7 417.6
Administrative services contract fees 512.2 475.5
Net investment income 271.5 276.0
Other income 11.0 6.7
Net realized capital gains 26.1 21.7
--------- ---------
Total revenue 4,821.3 4,466.5
Benefits and expenses:
Health care costs (1) 2,741.8 2,367.9
Current and future benefits 547.0 527.6
Operating expenses:
Selling expenses 163.6 145.9
General and administrative expenses 820.1 874.5
--------- ---------
Total operating expenses 983.7 1,020.4
Interest expense 25.5 25.9
Amortization of other acquired intangible assets 12.7 12.7
--------- ---------
Total benefits and expenses 4,310.7 3,954.5
--------- ---------
Income from continuing operations before
income taxes 510.6 512.0
Income taxes 184.8 182.0
--------- ---------
Income from continuing operations 325.8 330.0
Income from discontinued operations,
net of tax (2) 40.0 -
--------- ---------
Net income $365.8 $330.0
========= =========
Shareholders' equity $8,175.3 $7,372.3
========= =========
(1) The three months ended March 31, 2004 and March 31, 2003 include
favorable development of prior-period health care cost estimates
of approximately $41 million pretax (approximately $27 million
after tax) and approximately $164 million pretax (approximately
$107 million after tax), respectively, in the Health Care segment.
(2) Income from discontinued operations of approximately $40 million
for the three months ended March 31, 2004 reflects the completion
of certain Internal Revenue Service audits associated with
businesses previously sold (former Aetna).
Summary of Results
($ in Millions)
Three Months Ended
-------------------------
March 31, March 31,
2004 2003
------------ ------------
Operating earnings, excluding favorable
development $281.8 $208.9
Favorable development of prior-period health
care cost estimates 27.0 107.0
------------ ------------
Operating earnings 308.8 315.9
Net realized capital gains 17.0 14.1
------------ ------------
Income from continuing operations
(GAAP measure) 325.8 330.0
Income from discontinued operations (1) 40.0 -
------------ ------------
Net income (GAAP measure) $365.8 $330.0
============ ============
Weighted average common shares - basic 153,918,359 150,981,679
============ ============
Weighted average common shares - diluted 160,417,693 155,404,140
============ ============
Summary of Results Per Common Share
Operating earnings, excluding favorable
development $1.75 $1.34
Favorable development of prior-period health
care cost estimates .17 .69
------------ ------------
Operating earnings 1.92 2.03
Net realized capital gains .11 .09
------------ ------------
Income from continuing operations
(GAAP measure) 2.03 2.12
Income from discontinued operations (1) .25 -
------------ ------------
Net income (GAAP measure) $2.28 $2.12
============ ============
Shareholders' equity (2) $53.65 $48.55
============ ============
(1) Income from discontinued operations of approximately $40 million
for the three months ended March 31, 2004 reflects the completion
of certain Internal Revenue Service audits associated with
businesses previously sold (former Aetna).
(2) Actual common shares outstanding were 152.4 million at March 31,
2004 and 151.9 million at March 31, 2003.
Segment Information (1)
($ in Millions)
Three Months Ended
-----------------------
March 31, March 31,
2004 2003
----------- ----------
Health Care:
Total revenue $4,146.8 $3,814.8
=========== ==========
Selling expenses $148.8 $133.1
General and administrative expenses 775.4 829.4
----------- ----------
Total operating expenses $924.2 $962.5
=========== ==========
Operating earnings, excluding
favorable development $261.4 $186.3
Favorable development of prior-period
health care cost estimates 27.0 107.0
----------- ----------
Operating earnings 288.4 293.3
Net realized capital gains 7.1 8.6
----------- ----------
Net income (GAAP measure) $295.5 $301.9
=========== ==========
Group Insurance:
Total revenue $484.9 $457.4
=========== ==========
Selling expenses $14.8 $12.8
General and administrative expenses 39.7 40.0
----------- ----------
Total operating expenses $54.5 $52.8
=========== ==========
Operating earnings $30.8 $32.6
Net realized capital gains 7.9 2.5
----------- ----------
Net income (GAAP measure) $38.7 $35.1
=========== ==========
Large Case Pensions:
Total revenue $189.6 $194.3
=========== ==========
Operating earnings $6.1 $6.8
Net realized capital gains 2.0 3.0
----------- ----------
Net income (GAAP measure) $8.1 $9.8
=========== ==========
Total Company:
Total revenue $4,821.3 $4,466.5
=========== ==========
Selling expenses $163.6 $145.9
General and administrative expenses 820.1 874.5
----------- ----------
Total operating expenses $983.7 $1,020.4
=========== ==========
(1) Revenue and operating expense information is presented before
income taxes. Operating earnings information is presented net of
income taxes.
Enrollment
(Members in Thousands)
March 31, March 31, Dec. 31,
2004 2003 2003
------- --------- ---------
Medical Membership:
Commercial 13,136 12,815 12,783
Medicare 102 108 105
Medicaid 106 108 114
------- --------- ---------
Total Medical Membership 13,344 13,031 13,002
======= ========= =========
Dental Membership 11,214 11,378 10,942
======= ========= =========
Pharmacy Membership (1) 8,057 7,431 7,521
======= ========= =========
Group Insurance Membership 12,394 11,773 12,288
======= ========= =========
Aetna Health Fund(SM) Membership (2) 183 38 44
======= ========= =========
Operating Margins
($ in Millions)
Three Months Ended
-------------------
March 31, March 31,
2004 2003
--------- ---------
Reconciliation to Income from continuing
operations before income taxes:
Operating earnings, excluding interest
expense, amortization of other acquired
intangible assets and favorable development (A) $481.7 $364.9
Favorable development of prior-period
health care cost estimates 41.0 164.0
--------- ---------
Operating earnings, excluding interest
expense and amortization of other acquired
intangible assets (B) 522.7 528.9
Interest expense (25.5) (25.9)
Amortization of other acquired intangible assets (12.7) (12.7)
Net realized capital gains 26.1 21.7
--------- ---------
Income from continuing operations before
income taxes (C) (GAAP measure) $510.6 $512.0
========= =========
Reconciliation to Income from continuing operations:
Operating earnings, excluding interest
expense, amortization of other acquired
intangible assets and favorable development (D) $306.6 $233.9
Favorable development of prior-period
health care cost estimates, net of tax 27.0 107.0
--------- ---------
Operating earnings, excluding interest
expense and amortization of other acquired
intangible assets (E) 333.6 340.9
Interest expense, net of tax (16.5) (16.8)
Amortization of other acquired intangible
assets, net of tax (8.3) (8.2)
Net realized capital gains, net of tax 17.0 14.1
--------- ---------
Income from continuing operations (F)
(GAAP measure) $325.8 $330.0
========= =========
Reconciliation of Revenue:
Revenue, excluding net realized capital gains (G) $4,795.2 $4,444.8
Net realized capital gains 26.1 21.7
--------- ---------
Total revenue (H) (GAAP measure) $4,821.3 $4,466.5
========= =========
Total Company Operating Margins:
Pretax operating margin (B)/(G) 10.9% 11.9%
Pretax operating margin - Adjusted (A)/(G) 10.0% 8.2%
Pretax operating margin (C)/(H)
(GAAP measure) 10.6% 11.5%
After-tax operating margin (E)/(G) 7.0% 7.7%
After-tax operating margin - Adjusted (D)/(G) 6.4% 5.3%
After-tax operating margin (F)/(H)
(GAAP measure) 6.8% 7.4%
(1) Pharmacy membership includes 7,693; 7,361 and 7,244 thousand
members receiving pharmacy benefit management services and 364; 70
and 277 thousand members who purchased medications through Aetna's
mail order pharmacy during the quarterly period at March 31, 2004;
March 31, 2003 and December 31, 2003, respectively.
(2) Represents Aetna's Commercial members in consumer-directed health
plan products.
Health Care Medical Cost Ratios (1)
($ in Millions)
Three Months Ended
-------------------
March 31, March 31,
2004 2003
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Health Care Premiums:
Health Care Risk (A) $3,557.8 $3,269.0
Commercial Risk (B) $3,326.2 $3,045.2
Medicare (C) $231.6 $223.8
Health Care Costs:
Health Care Risk
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Health care costs (D) (GAAP measure) $2,741.8 $2,367.9
Favorable development of prior-period health
care cost estimates 41.0 164.0
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Health care costs - Adjusted (E) $2,782.8 $2,531.9
========= =========
Commercial Risk
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Health care costs (F) (GAAP measure) $2,546.3 $2,191.3
Favorable development of prior-period health
care cost estimates 36.0 152.0
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Health care costs - Adjusted (G) $2,582.3 $2,343.3
========= =========
Medicare
--------
Health care costs (H) (GAAP measure) $195.6 $176.9
Favorable development of prior-period health
care cost estimates 5.0 12.0
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Health care costs - Adjusted (I) $200.6 $188.9
========= =========
Health Care Medical Cost Ratios:
Health Care Risk (D)/(A) (GAAP measure) 77.1% 72.4%
Health Care Risk - Adjusted (E)/(A) 78.2% 77.5%
Commercial Risk (F)/(B) (GAAP measure) 76.6% 72.0%
Commercial Risk - Adjusted (G)/(B) 77.6% 77.0%
Medicare (H)/(C) (GAAP measure) 84.5% 79.0%
Medicare - Adjusted (I)/(C) 86.6% 84.4%
(1) Health Care Risk includes all medical and dental risk products.
Commercial Risk includes all medical and dental risk products
except Medicare and Medicaid. Risk includes all medical and dental
products for which the Company assumes all or a majority of health
care cost, utilization or other risk.
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