Aetna Reports Second-Quarter 1999 Earnings; Total Revenues Increase 23%; Operating Earnings Per Share Up 16%; 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)--July 29, 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 second-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 , excluding unusual items, of $170.6 million, or $1.10 per common share, a 16 percent increase in operating earnings per share over the $153.0 million, or $0.95 per common share, reported in the second quarter of 1998.(1) First Call analyst consensus estimates of operating earnings was $1.09 per common share. "We are pleased to report the sixth-consecutive quarter of growth in operating earnings per share," 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, membership increases and improved 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. results drove solid improvement in the 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, business. "In our 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, in addition to market performance, we benefited from continuing sales momentum in the second quarter, with new sales during the quarter at twice the level in the second quarter of 1998. "In our international business, we continue to benefit from our geographic diversity, with strong results in our Asia Pacific operations, including over 40 percent revenue growth, balancing some softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . "Operationally, we completed all scheduled Year 2000 remediation and testing milestones for critical projects in the quarter, and our Year 2000 efforts remain on track. "The recently completed redemption of the Convertible Preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". , announced in the second quarter, will result in approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $48 million of cash dividend savings over the next 12 months. We issued approximately 9.5 million shares of common stock in the redemption, or 2.1 million shares fewer than if the preferred had converted at maturity. We will continue to assess the best use of our capital, mindful mind·ful adj. Attentive; heedful: always mindful of family responsibilities. See Synonyms at careful. mind of our desire both to maintain a strong capital base and to enhance shareholder value. "As we move to obtain the remaining state 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. approval on the Prudential Prudential is the name of two different companies and buildings named after them: Companies:
tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. our mission of being the leading global provider of health and financial services benefits," 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. Operating Earnings Rise 29 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 29 percent increase in operating earnings for the 1999 second quarter. Operating earnings, before Year 2000 costs, were $134.5 million, compared with $104.6 million in the prior-year period, due to solid commercial HMO membership growth, in addition to the NYLCare members acquired in 1998, as well as improved Medicare results. Second-quarter 1999 operating earnings are slightly higher than the $133.5 million reported for the first quarter of 1999. The Commercial HMO medical loss ratio (MLR MLR mixed lymphocyte reaction. MLR Myocardial laser revascularization, see there ) in the second quarter of 1999 was 82.2 percent, an increase over the 81.2 percent reported in the 1998 second quarter, but only slightly higher than the 82.0 percent reported in the first quarter this year. The Commercial HMO MLR for this quarter reflects the inclusion of NYLCare and higher medical costs -- particularly 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. . The second quarter 1999 Medicare HMO MLR improved significantly to 90.4 percent versus 95.5 percent for the prior-year period, primarily due to the company's exiting of selected markets as of January January: see month. 1, 1999, as well as efforts to contain medical costs and the inclusion of NYLCare. Commercial HMO membership as of June June: see month. 30, 1999 increased by 7 percent, or approximately 400,000 members from December December: see month. 31, 1998. The company added 20,000 new Medicare members in the quarter, resulting in a net increase of 31,000 Medicare members since year end, including the exiting of selected markets. Second-quarter HMO SG&A expenses as a percent of revenue were 11.3 percent, lower than the prior-year period ratio of 12.0 percent, but up slightly from the 11.0 percent reported in the first quarter this year, due to seasonally higher staffing costs. Second-quarter 1999 results in the Group Insurance and Other Health business were slightly lower than the prior-year period, which had favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. reserve developments. Aetna Retirement Services Operating Earnings Increase 18 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 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 second-quarter 1999 operating earnings, before Year 2000 costs, of $56.3 million. This represents an 18 percent increase over the prior-year period, excluding operating earnings from the individual life business that the company sold in October October: see month. 1998. Second-quarter 1999 results for ARS reflect 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. and administration grew over the prior-year period by 24 percent to $62.5 billion. Assets under management and administration rose 7 percent over the first quarter of 1999. Aetna International Operating Earnings Grow 23 Percent Aetna International, which primarily sells life insurance, health and financial retirement services products in targeted emerging markets in 17 countries, reported second-quarter 1999 operating earnings, before Year 2000 costs, of $50.0 million, a 23 percent increase over the $40.7 million reported in the second quarter of 1998. Growth in the international business for the second quarter reflected strong performance in Asia Pacific, particularly 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 and Malaysia Malaysia (məlā`zhə), independent federation (2005 est. pop. 23,953,000), 128,430 sq mi (332,633 sq km), Southeast Asia. The official capital and by far the largest city is Kuala Lumpur; Putrajaya is the adminstrative capital. , as well as in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . Although earnings in Latin America were somewhat higher than the prior-year period, they were down significantly from the first quarter of this year. The company continues to monitor the ongoing impact of regional economic conditions in Latin America. Large Case Pensions, which manages a variety of retirement and other savings products 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 $21.7 million in operating earnings, before Year 2000 costs, excluding a $50.2 million benefit from the reduction in 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: product reserves, which is reflected as an unusual item. 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 second quarter of 1999, grew 23 percent, primarily due to the NYLCare acquisition. Second-quarter 1999 total revenues were $5.9 billion, up from $4.8 billion during the prior-year period. Net Income for the 1999 second quarter was $227.2 million, or $1.50 per common share, including $6.4 million of net realized capital gains and the previously mentioned reduction in reserves in the company's Large Case Pensions business. This compares to $265.7 million in net income, or $1.69 per common share in the prior-year period. Second-quarter 1998 results included net realized capital gains of $112.7 million, largely related to a gain on the sale of the remaining portion of Aetna's investment in Travelers Property Casualty Corp. CAUTIONARY STATEMENT - Certain information in this press release is forward looking including, but not limited to, statements concerning the Prudential HealthCare acquisition and Year 2000 efforts. That information is based on management's estimates, assumptions and projections, and is subject to significant uncertainties, many of which are beyond the control of the company. 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 HealthCare transaction on a timely basis and in a cost-efficient Adj. 1. cost-efficient - productive relative to the cost cost-effective efficient - being effective without wasting time or effort or expense; "an efficient production manager"; "efficient engines save gas" manner (which also is affected by the timing and conditions of required regulatory approvals, the satisfaction of the contractual conditions to closing the acquisition, the adequacy of certain contractual protections, and 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 integrate management information systems); adverse government regulation; unanticipated increases in medical costs, including pharmacy costs and 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; ability of the company and its external relationships to resolve 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 further discussion of important risk factors that may materially affect Aetna's results and 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. herein, please see the risk factors contained in Aetna's Securities and Exchange Commission filings, which risk factors are incorporated herein by reference. You also should read those filings, particularly Aetna's 1998 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. and Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended June 30, 1999 for a discussion 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 af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. Year 2000 costs ($31.7 million in second-quarter 1999 and $24.5 million in second-quarter 1998). The unusual item in second-quarter 1999 is a discontinued products reserve release of $50.2 million after tax. Second-quarter 1998 results also include $24.2 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 June 30, 6 Months Ended June 30,
1999 1998 1999 1998
Revenue:
Premiums $ 4,580.5 $ 3,279.1 $ 8,961.9 $ 6,517.7
Net investment income 725.0 822.8 1,465.7 1,635.5
Fees and other income 634.1 553.6 1,191.0 1,104.1
Net realized capital gains 9.8 172.6 26.9 204.3
Total revenue 5,949.4 4,828.1 11,645.5 9,461.6
Benefits and expenses:
Current and future
benefits 4,352.9 3,270.7 8,487.9 6,541.3
Operating expenses (1) 1,080.6 908.4 2,119.4 1,786.6
Interest expense 64.1 56.5 128.7 113.4
Amortization of goodwill
and other acquired
intangible assets 105.7 96.9 213.4 193.1
Amortization of deferred
policy acquisition costs 51.7 62.8 101.7 115.2
Reduction of loss on
discontinued products (77.2) -- (77.2) --
Total benefits
and expenses 5,577.8 4,395.3 10,973.9 8,749.6
Income before income taxes 371.6 432.8 671.6 712.0
Income taxes 144.4 167.1 265.0 278.8
Net income 227.2 265.7 406.6 433.2
Less: preferred stock
dividends 13.8 13.9 27.6 27.8
Net income applicable
to common ownership $ 213.4 $ 251.8 $ 379.0 $ 405.4
Shareholders' equity $ 11,276.1 $ 11,360.5
(1) Includes Year 2000 costs (pretax) of $47.1 million and $37.4
million, for the three months ended June 30, 1999 and 1998,
respectively, and $88.4 million and $63.0 million for the six months
ended June 30, 1999 and 1998, respectively.
Consolidated Statements of Income (Continued)
3 Months Ended June 30, 6 Months Ended June 30,
1999 1998 1999 1998
Results per common share:
Operating earnings excluding unusual items: (1)(2)(3)
Basic $1.34 $1.13 $2.62 $2.15
Assuming dilution $1.33 $1.12 $2.60 $2.13
Including Year 2000
costs $1.10 $.95 $2.19 $1.86
Operating earnings including
unusual items - assuming
dilution (1)(2)(3) $1.46 $.95 $2.54 $1.86
Net income - assuming
dilution $1.50 $1.69 $2.66 $2.75
Common shareholders' equity $73.88 $72.72
Common stock dividends $.20 $.20 $.40 $.40
Weighted average common
shares - basic 140,910,901 145,088,168 141,140,347 145,341,991
Weighted average
common shares and
common share
equivalents
related to: (4)
Operating earnings
excluding unusual
items 142,212,379 146,286,516 142,318,019 146,522,390
Operating earnings
excluding unusual
items - including
Year 2000 costs 142,212,379 146,286,516 142,318,019 146,522,390
Operating earnings
including
unusual items 142,212,379 146,286,516 142,318,019 146,522,390
Net Income 151,731,588 157,388,828 142,318,019 157,689,329
(1) Operating earnings for the three and six months ended June
30, 1999 include NYLCare health business earnings (including the
portion that Aetna must divest in connection with the Prudential
HealthCare acquisition) and interest expense related to funding the
transaction.
(2) Unusual items include: for the three and six months ended
June 30, 1999, an after-tax benefit 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,
1999 and 1998, Year 2000 costs related to all segments.
(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 June 30, 1999
and 1998 were 141.0 million and 144.4 million, respectively. In
addition, 11.6 million and 11.6 million shares of mandatorily
convertible preferred stock (redeemed on July 19, 1999 for issuance of
9.5 million shares of common stock) were outstanding at June 30, 1999
and 1998, respectively.
Additional information about the Company's results is published
in the 1999 Second Quarter Financial Supplement available from Robyn
S. Walsh, Investor Relations, (860) 273-6184, in the Company's 1999
Second Quarter 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 June 30, 6 Months Ended June 30,
1999 1998 1999 1998
Aetna U.S. Healthcare:
Revenue $ 4,482.5 $ 3,330.7 $ 8,927.6 $ 6,642.4
Operating earnings
excluding unusual item $ 134.5 $ 104.6 $ 268.0 $ 205.1
Year 2000 costs (20.7) (15.6) (38.2) (24.4)
Operating earnings $ 113.8 $ 89.0 $ 229.8 $ 180.7
Aetna Retirement Services:
Revenue - Financial
Services $ 376.8 $ 345.0 $ 747.5 $ 681.0
Revenue - Individual
Life (3) $ -- $ 128.6 $ -- $ 263.2
Operating earnings
excluding unusual item:
Financial Services $ 56.3 $ 47.8 $ 109.3 $ 88.6
Individual Life (3) -- 24.2 -- 47.2
Year 2000 costs (5.4) (5.1) (11.1) (9.2)
Operating earnings $ 50.9 $ 66.9 $ 98.2 $ 126.6
Aetna International:
Revenue $ 787.3 $ 513.6 $ 1,357.5 $ 983.1
Operating earnings
excluding unusual item $ 50.0 $ 40.7 $ 95.6 $ 78.2
Year 2000 costs (4.6) (1.1) (7.2) (2.8)
Operating earnings $ 45.4 $ 39.6 $ 88.4 $ 75.4
Large Case Pensions:
Revenue $ 291.6 $ 335.8 $ 581.3 $ 684.1
Operating earnings
excluding unusual items $ 21.7 $ 22.2 $ 44.2 $ 44.8
Year 2000 costs (.1) (.3) (.3) (.4)
Reduction of loss on
discontinued products 50.2 -- 50.2 --
Operating earnings $ 71.8 $ 21.9 $ 94.1 $ 44.4
Corporate:
Interest $ (40.1) $ (34.7) $ (80.7) $ (69.9)
Other (20.1) (27.3) (39.6) (53.6)
Reinvestment of
Life Proceeds -- -- .6 --
Operating expenses
excluding unusual item (60.2) (62.0) (119.7) (123.5)
Year 2000 costs (.9) (2.4) (1.8) (4.0)
Net operating expenses $ (61.1) $ (64.4) $ (121.5) $ (127.5)
Total Company:
Operating earnings
excluding unusual items $ 202.3 $ 177.5 $ 397.4 $ 340.4
Year 2000 costs (31.7) (24.5) (58.6) (40.8)
Operating earnings
excluding unusual items,
including Year 2000 costs 170.6 153.0 338.8 299.6
Reduction of loss on
discontinued products 50.2 -- 50.2 --
Operating earnings 220.8 153.0 389.0 299.6
Net realized capital gains 6.4 112.7 17.6 133.6
Net income $ 227.2 $ 265.7 $ 406.6 $ 433.2
(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 and six months ended June
30, 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:
June December June December June
30, 31, 30, 31, 30,
1999(1) 1998(1) 1998 1998 1998
Membership by Product:
HMO - Risk
Commercial 5,434 5,104 3,905 6.5 39.2
Medicare 566 535 405 5.8 39.8
Medicaid 141 132 69 6.8 104.3
HMO - Nonrisk 755 640 399 18.0 89.2
Total HMO 6,896 6,411 4,778 7.6 44.3
POS 2,663 2,770 2,781 (3.9) (4.2)
PPO 3,829 4,032 3,343 (5.0) 14.5
Total Managed Care
Membership 13,388 13,213 10,902 1.3 22.8
Indemnity 2,220 2,452 2,554 (9.5) (13.1)
Total Health Membership 15,608 15,665 13,456 (.4) 16.0
Total Group Insurance 12,361 12,452 12,336 (.7) .2
Three Months Ended Six Months Ended
June March June June June
30, 31, 30, 30, 30,
1999 1999 1998 1999 1998
Commercial HMO Medical Loss Ratio 82.2% 82.0% 81.2% 82.1% 81.9%
Medicare HMO Medical Loss Ratio 90.4% 90.1% 95.5% 90.3% 94.2%
Health Risk Medical Loss Ratio 84.9% 84.9% 84.9% 84.9% 85.0%
(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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