Aetna Reports Second Quarter 1998 Results.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)--Aug. 5, 1998-- --Earnings of $0.95 per share exceed First Call consensus estimates of $0.91-- 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 second quarter 1998 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 $153.0 million, or $0.95 per common share.(a) Excluding unusual items, second quarter 1998 operating earnings were $177.5 million, or $1.12 per common share, compared with $185.6 million, or $1.13 per common share, in the second quarter of 1997.(b) Cash operating earnings for the second quarter of 1998 were $1.64 per common share. Cash operating earnings are defined as operating earnings before unusual items adjusted for the amortization of goodwill and 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. . "Aetna continues to make strategic strides with the announced sale of our domestic individual life operations and the completion of the acquisition of the NYLCare health business, which expands our already-growing 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, membership and places us in a top position in attractive key markets," 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 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. , we continued to execute our strategy and are pleased by positive developments in our commercial HMO medical loss ratio and HMO membership growth. In addition, we continue to make customer service initiatives a top priority to further position us for future growth. During the quarter, we introduced E-Pay, a groundbreaking electronic claims and referral program, which is designed to significantly enhance service levels to physicians and members. "Our Aetna Retirement Services and Aetna International businesses have continued to perform well, with each producing strong, double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. earnings growth and each well-positioned competitively for the long term," Huber said. Aetna U.S. Healthcare Shows Improved Commercial HMO Medical Loss Ratio and Continued Growth in HMO Risk Membership 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 second quarter 1998 operating earnings, excluding unusual items, of $104.6 million, reflecting positive commercial HMO medical loss ratio (MLR MLR mixed lymphocyte reaction. MLR Myocardial laser revascularization, see there ) developments. Second quarter 1998 results improved sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen over first quarter earnings of $100.5 million, excluding unusual items. These results compare with operating earnings of $131.8 million, before unusual items in the prior-year period. In the commercial HMO business, which has approximately two-thirds of all health risk members, the MLR was 81.2 percent, down significantly from the 82.7 percent MLR in the 1998 first quarter. The decline in MLR primarily reflects the positive impact of initiatives to lower medical costs. The commercial MLR also was slightly down from last year's second quarter level of 81.7 percent. Medical costs 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. portion of the HMO business were higher in the 1998 second quarter compared to the prior-year period, as a result of increased 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. , physician and outpatient outpatient /out·pa·tient/ (-pa-shent) a patient who comes to the hospital, clinic, or dispensary for diagnosis and/or treatment but does not occupy a bed. out·pa·tient n. utilization. Total commercial HMO and Medicare HMO risk membership increased 11 percent over the second quarter of 1997. Additionally, commercial HMO and Medicare HMO risk membership grew by 286,000 members, or 7 percent, since 1997 year end, due to strong growth in the company's markets in the Midwest Midwest or Middle West, region of the United States centered on the western Great Lakes and the upper-middle Mississippi valley. It is a somewhat imprecise term that has been applied to the northern section of the land between the Appalachians , West Central, West and Southeast regions. Beginning in the third quarter this year, Aetna U.S. Healthcare's membership enrollment will include the addition of 1.5 million NYLCare HMO members. Health Risk operating earnings, excluding unusual items, declined from the prior-year quarter primarily due to lower indemnity and PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there results and higher Medicare medical costs. SG&A expenses increased when compared to the prior-year quarter as resources were added to serve HMO risk membership growth and to improve customer service and claims handling. Operating earnings in the Group Insurance and Other Health business declined in the 1998 second quarter from the prior-year quarter due to lower nonrisk health and group membership and unfavorable claims experience in the disability line of business. Aetna Retirement Services Earnings Increase 27 Percent 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 individuals, 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 and small businesses, in addition to selling life insurance, reported second quarter 1998 operating earnings, before unusual items, of $72.0 million, a 27 percent increase over the $56.5 million reported in the second quarter of 1997. Improved earnings for the second quarter from the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. business reflect increased fee income from a growing base of 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. , partially offset by increased 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. . Assets under management grew as a result of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. market conditions, additional deposits and new sales. Total assets under management as of June June: see month. 30, 1998, rose to $50.5 billion. Earnings also improved in the individual life insurance business. In May, the company announced that it was selling the domestic individual life insurance business to Lincoln Lincoln, city and district, England Lincoln, city (1991 pop. 79,980) and district, Lincolnshire, E England, in the Parts of Kesteven, on the Witham River. National Insurance Corporation. The sale, which recently received early termination of the waiting period under the Hart-Scott-Rodino antitrust laws antitrust laws n. acts adopted by Congress to outlaw or restrict business practices considered to be monopolistic or which restrain interstate commerce. The Sherman Antitrust Act of 1890 declared illegal "every contract, combination.... , is expected to close in the fall of 1998. Also during the second quarter, ARS launched new 401(k) products specifically targeted to small- to mid-size employers. The company also stepped up its efforts to market defined contribution products and renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. its efforts to win retail customers by marketing Aetna Mutual Funds through retail broker-dealers. Aetna International Earnings Up 26 Percent Aetna International, which primarily sells life insurance, health and financial services products in targeted emerging markets, reported second quarter 1998 operating earnings, excluding unusual items, of $40.7 million, a 26 percent increase over the $32.2 million reported in the second quarter of 1997. Growth in the international business was driven by continued robust results from operations in 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 , as well as strong earnings growth from the company's pension business in Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. . During the second quarter, Aetna International took steps to build its global franchise by targeting expansion in the Argentine Argentine having some relationship with the country Argentina. Argentine tick margaropuswinthemi. Argentine tortoise geochelonechilensis. and Chilean health markets. Total Aetna Revenues, including net realized capital gains for the second quarter of 1998, grew 4 percent to $4.8 billion, compared with $4.6 billion in total revenues for the second quarter of 1997. Net Income for the 1998 second quarter was $265.7 million, or $1.69 per common share, including net realized capital gains of $112.7 million after tax, largely related to a gain on the sale of the remaining portion of Aetna's investment in Travelers Property Casualty Corp. Net income for the second quarter of 1997 was $230.1 million, or $1.43 per common share, including $24.3 million after tax of net realized capital gains. (a) Operating earnings exclude 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. . (b) Unusual items include $24.5 million of Year 2000 remediation costs in the second quarter of 1998 and a $20.2 million 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. benefit from a reduction in severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and facilities reserves in the Aetna U.S. Healthcare segment in the second quarter of 1997. -0-
Consolidated Statements of Income
(Millions, except share and per common share data)
3 Months 6 Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Revenue:
Premiums $3,279.1 $3,178.1 $6,517.7 $6,265.5
Net investment income $822.8 $847.1 $1,635.5 $1,687.2
Fees and other income $553.6 $568.4 $1,104.1 $1,126.1
Net realized capital gains $172.6 $34.7 $204.3 $36.2
Total revenue $4,828.1 $4,628.3 $9,461.6 $9,115.0
Benefits and expenses:
Current and future benefits $3,270.7 $3,208.6 $6,541.3 $6,365.7
Operating expenses(c) $908.4 $869.1 $1,786.6 $1,703.2
Interest expense $56.5 $60.8 $113.4 $116.8
Amortization of goodwill
and other acquired
intangible assets $96.9 $95.3 $193.1 $188.0
Amortization of deferred policy
acquisition costs $62.8 $55.4 $115.2 $100.8
Reduction of loss on
discontinued products - - - ($172.5)
Reductions of severance and
facilities reserve - ($31.0) - ($45.0)
Total benefits and
expenses $4,395.3 $4,258.2 $8,749.6 $8,257.0
Income before income taxes $432.8 $370.1 $712.0 $858.0
Income taxes $167.1 $140.0 $278.8 $348.6
Net income $265.7 $230.1 $433.2 $509.4
Less: preferred stock
dividends $13.9 $13.9 $27.8 $27.8
Net income applicable to common
ownership $251.8 $216.2 $405.4 $481.6
Shareholders' equity - - $11,360.5 $11,288.5
(c) Includes Year 2000 costs (pretax) of $37.4 million and $63.0
million, for the three and six months ended June 30, 1998,
respectively.
Results per common share:
Operating earnings before
unusual items: (d)(e)
Basic $1.13 $1.15 $2.15 $2.24
Assuming dilution $1.12 $1.13 $2.13 $2.22
Operating earnings after
unusual items - assuming
dilution (d)(e) $ .95 $1.27 $1.86 $3.10
Net income - assuming dilution $1.69 $1.43 $2.75 $3.15
Common shareholders' equity $72.72 $69.51
Common stock dividends $ .20 $ .20 $ .40 $ .40
Weighted average common shares
- basic 145,088,168 149,863,417 145,341,991 149,907,250
Weighted average common shares
and common share equivalents
related to: (f)
Operating earnings
before unusual
items 146,286,516 151,596,647 146,522,390 151,466,105
Operating earnings
after unusual
items 146,286,516 151,596,647 146,522,390 161,486,452
Net Income 157,388,828 151,596,647 157,689,329 161,486,452
(d) Unusual items include: for the three and six months ended June 30,
1998, Year 2000 costs related to all segments; for the six months
ended June 30, 1997, after-tax benefits from a reduction of the
reserve for anticipated future losses on discontinued products in
the Large Case Pensions segment; and for the three and six months
ended June 30, 1997, reductions in the severance and facilities
reserve in the Aetna U.S. Healthcare segment.
(e) The Company adopted AICPA Statement of Position 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for
Internal Use, in the first quarter of 1998 which requires certain
internal-use software costs to be capitalized and amortized rather
than expensed. As a result of this new standard, operating
earnings for the three and six months ended June 30, 1998, include
a net after-tax benefit of $9.2 million and $17.7 million,
respectively.
(f) 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 June 30, 1998 and 1997 were 144.4 million and 150.0
million, respectively. In addition, 11.6 million and 11.7 million
shares of mandatorily convertible preferred stock were outstanding
at June 30, 1998 and 1997, respectively.
-0- Additional information about the Company's results is published in the 1998 Second Quarter Financial Supplement available from Robyn S. Walsh Walsh has several meanings: Mathematics
The process by which the corporation communicates with its investors. , 860/273-6184, in the Company's 1998 Form 10-Q Form 10-Q See 10-Q. for the second quarter filed with the Securities and Exchange Commission, or is available from our web site, www.aetna.com.
-0-
Segment Information(g)
(Millions)
3 Months 6 Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Aetna U.S. Healthcare:
Revenue $3,330.7 $3,234.8 $6,642.4 $6,402.6
Operating earnings before
unusual items $104.6 $131.8 $205.1 $263.3
Year 2000 costs ($15.6) - ($24.4) -
Reductions of severance and
facilities reserve - $20.2 - $29.3
Operating earnings $89.0 $152.0 $180.7 $292.6
Aetna Retirement Services:
Revenue $473.6 $453.9 $944.2 $901.3
Operating earnings
before unusual item $72.0 $56.5 $135.8 $109.4
Year 2000 costs ($5.1) - ($9.2) -
Operating earnings $66.9 $56.5 $126.6 $109.4
International:
Revenue $513.6 $485.4 $983.1 $929.2
Operating earnings before
unusual item $40.7 $32.2 $78.2 $59.7
Year 2000 costs ($1.1) - ($2.8) -
Operating earnings $39.6 $32.2 $75.4 $59.7
Large Case Pensions:
Revenue $335.8 $413.4 $684.1 $831.4
Operatings earnings before
unusual items $22.2 $28.1 $44.8 $57.9
Year 2000 costs ($.3) - ($.4) -
Reduction of loss on
discontinued products - - - $108.4
Operating earnings $21.9 $28.1 $44.4 $166.3
Corporate:
Interest ($34.7) ($38.5) ($69.9) ($73.7)
Other ($27.3) ($24.5) ($53.6) ($53.3)
Operating expenses before
unusual item ($62.0) ($63.0) ($123.5) ($127.0)
Year 2000 costs ($2.4) - ($4.0) -
Net operating expenses ($64.4) ($63.0) ($127.5) ($127.0)
Total Company:
Operating earnings before
unusual items $177.5 $185.6 $340.4 $363.3
Year 2000 costs ($24.5) - ($40.8) -
Reduction of loss on
discontinued products - - - $108.4
Reductions of severance
and facilities reserve - $20.2 - $29.3
Operating earnings $153.0 $205.8 $299.6 $501.0
Net realized capital gains $112.7 $24.3 $133.6 $8.4
Net income $265.7 $230.1 $433.2 $509.4
(g) All amounts, except revenue, are presented net of taxes. Revenue
and operating earnings exclude net realized capital gains or
losses.
Aetna U.S. Healthcare Enrollment and Other Statistics (h)
(Thousands)
% Change From:
June 30, Dec. 31, June 30, Dec. 31, June 30,
1998 1997 1997 1997 1997
Membership by Product:
HMO - Risk
Commercial 3,905 3,642 3,536 7.2 10.4
Medicare 405 382 349 6.0 16.0
Medicaid 69 98 107 (29.6) (35.5)
HMO - Nonrisk 399 603 598 (33.8) (33.3)
Total HMO 4,778 4,725 4,590 1.1 4.1
POS 2,781 2,783 2,760 (.1) .8
PPO 3,343 3,621 3,639 (7.7) (8.1)
Total Managed Care
Membership 10,902 11,129 10,989 (2.0) (.8)
Indemnity 2,554 2,605 2,726 (2.0) (6.3)
Total Health Membership 13,456 13,734 13,715 (2.0) (1.9)
Total Group Insurance 12,336 12,478 12,565 (1.1) (1.8)
Three Months Ended
June 30, March 31, June 30,
1998 1998 1997
Commercial HMO Medical Loss Ratio 81.2% 82.7% 81.7%
Medicare HMO Medical Loss Ratio 95.5% 92.8% 92.4%
Health Risk Medical Loss Ratio 84.9% 85.2% 83.6%
(h) Health membership as of June 30, 1997 reflects improved data as a
result of system and plan conversions. The conversions
predominately affected indemnity and PPO membership and had an
immaterial impact on all other health products. June 30, 1997
membership reflects adjustments which continued to occur through
the latter half of 1997, as applied to June 30, 1997 membership
previously reported.
Group Insurance membership as of December 31, 1997 and June 30,
1997 reflects improved data as a result of the conversion to a new
membership reporting system. December 31, 1997 and June 30, 1997
membership reflects adjustments which continued to occur through
the latter half of 1997, as applied to December 31, 1997 and
June 30, 1997 membership previously reported. Many Group Insurance
members participate in more than one type of Aetna U.S. Healthcare
coverage and are counted in each.
-0- Information about Aetna earnings is available at http://www.aetna.com. CONTACT: Aetna Media, Patricia R. Seif, 860/273-3658 or Investor, Robyn S. Walsh, 860/273-6184 |
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