- Operating earnings per share
(1) were $2.30 for the first quarter of 2016
- Net income (2) per
share was $2.06 for the first quarter of 2016
- Medical membership totaled
approximately 23.0 million at March 31, 2016
- Operating revenue (3)
was $15.7 billion for the first quarter of 2016
- Aetna now projects full-year 2016
operating earnings per share of $7.90 to $8.10 (4)
Aetna (NYSE: AET) announced first-quarter 2016 operating
earnings (1) of $810.8 million, or $2.30 per share. Net income (2)
for the first quarter of 2016 was $726.6 million, or $2.06 per
share. Net income for the first quarter of 2016 includes $0.24 per
share of net charges, which are detailed in the Summary of Results
table on page 8.
First-Quarter Financial Results at a Glance
(Millions,
except per share results) 2016
2015 Change
Operating revenue (3) $ 15,693.8 $ 15,086.0 4% Total revenue
15,693.4 15,094.1 4% Operating earnings (1) 810.8 844.3 (4)% Net
income (2) 726.6 777.5 (7)% Per share results: Operating
earnings (1) $ 2.30 $ 2.39 (4)% Net income (2) 2.06 2.20 (6)%
Weighted average common shares - diluted
353.1 352.7
“We started the year on a positive note, carrying over momentum
from 2015 where we generated record annual operating earnings and
revenues,” said Mark T. Bertolini, Aetna chairman and CEO. “Based
on first quarter results, we increased our full-year 2016 operating
earnings per share projection to a range of $7.90 to $8.10.
“We believe we remain on track to close our acquisition of
Humana in the second half of 2016, which will help enable us to
offer consumers a broader choice of products, access to higher
quality and more affordable care, and a better overall
experience. We have obtained approximately two-thirds of the
necessary state change of control approvals required to close the
transaction, and we continue to cooperate with the Department of
Justice as we move toward a combined organization that will
accelerate our efforts to build a healthier world,” said
Bertolini.
“We are encouraged by our first quarter results and our improved
2016 outlook, particularly at this early stage in the year,” said
Shawn M. Guertin, Aetna executive vice president and chief
financial officer. “Our operating results reflect the ongoing
execution of our growth strategy, and our financial position,
capital structure and liquidity all continue to be very
strong.”
Total company results
- Operating earnings (1)
were $810.8 million for the first quarter of 2016 compared with
$844.3 million for the first quarter of 2015. The decrease in
operating earnings is primarily due to lower operating earnings in
Aetna's Group Insurance segment primarily as a result of lower
underwriting margins in Aetna's disability products.
- Net income (2) was $726.6
million for the first quarter of 2016 compared with $777.5 million
for the first quarter of 2015. Net income in both periods reflects
net charges, which are detailed in the Summary of Results
table.
- Operating revenues (3)
were $15.7 billion for the first quarter of 2016 compared with
$15.1 billion for the first quarter of 2015. The increase in
operating revenues is primarily the result of higher Health Care
premium yields and membership growth in Aetna's Government
business, partially offset by membership declines in Aetna's group
Commercial Insured products. Total revenue was $15.7 billion and
$15.1 billion for the first quarters of 2016 and 2015,
respectively.
- Operating expenses (1)
were $2.8 billion for the first quarter of 2016. The operating
expense ratio (5) was 18.0 percent and 18.4 percent for the first
quarters of 2016 and 2015, respectively. The improvement in the
operating expense ratio during 2016 is primarily due to the
increase in operating revenues described above, which outpaced the
increase in operating expenses due to the execution of Aetna's
expense management initiatives. The total company expense ratio was
18.2 percent and 18.7 percent for the first quarters of 2016 and
2015, respectively.
- Pretax operating margin
(6) was 9.5 percent for the first quarter of 2016 compared
with 10.3 percent for the first quarter of 2015. The pretax
operating margin decreased primarily as a result of a higher
percentage of Aetna's 2016 operating revenue being derived from the
lower margin Government business. The after-tax net income margin
was 4.6 percent and 5.2 percent for the first quarters of 2016 and
2015, respectively.
- Effective tax rate remained
relatively flat at 43.5 percent for the first quarter of 2016
compared with 43.2 percent for the first quarter of 2015.
Health Care segment results
Health Care, which provides a full range of insured and
self-insured medical, pharmacy, dental and behavioral health
products and services, reported:
- Operating earnings (1) were $832.0
million for the first quarter of 2016 compared with $835.6 million
for the first quarter of 2015. Operating earnings remained
relatively flat primarily as a result of lower underwriting margins
in Aetna's Commercial business, substantially offset by higher fees
and other revenue primarily due to higher average fee yields.
- Net income (2) was $758.8 million for
the first quarter of 2016 compared with $766.5 million for the
first quarter of 2015.
- Operating revenues (3) were $15.0
billion for the first quarter of 2016 compared with $14.4 billion
for the first quarter of 2015. The increase is due primarily to
higher premium yields and membership growth in Aetna's Government
business, partially offset by membership losses in Aetna's group
Commercial Insured products. Total revenues were $15.0 billion and
$14.4 billion for the first quarters of 2016 and 2015,
respectively.
- Sequentially, first-quarter 2016
medical membership declined by 498 thousand primarily reflecting
declines in Aetna's Commercial ASC products, partially offset by
growth in Aetna's Government business.
- Medical benefit ratios (MBRs) for the
three months ended March 31, 2016 and 2015 were as
follows:
Three
Months Ended March 31,
2016 2015 Commercial 77.8 %
77.4 % Government 83.4 %
81.3 % Total Health Care
80.5 % 79.1 %
- Aetna's first-quarter 2016 Commercial
MBR increased over the first quarter of 2015 due primarily to the
extra calendar day of service in the first quarter of 2016.
- Aetna's first-quarter 2016 Government
MBR increased over the first quarter of 2015 due primarily to lower
favorable development of prior-years' health care cost estimates in
2016.
- In the first quarter of 2016, Aetna
experienced favorable development of prior-years' health care cost
estimates in its Commercial, Medicaid and Medicare products,
primarily attributable to fourth-quarter 2015 performance.
- Prior-years' health care costs payable
estimates developed favorably by $626.8 million and $653.1 million
during the first quarters of 2016 and 2015, respectively. This
development is reported on a basis consistent with the prior years'
development reported in the health care costs payable table in
Aetna's annual audited financial statements and does not directly
correspond to an increase in 2016 operating results.
Group Insurance segment results
Group Insurance, which includes group life, disability and
long-term care products, reported:
- Operating earnings (1) were $21.3
million for the first quarter of 2016 compared with $43.9 million
for the first quarter of 2015. Operating earnings decreased
primarily due to lower underwriting margins in Aetna's disability
products.
- Net income (2) was $23.4 million for
the first quarter of 2016 compared with $45.8 million for the first
quarter of 2015.
- Operating revenues (3) were $608.8
million for the first quarter of 2016 compared with $617.0 million
for the first quarter of 2015. Total revenues were $612.0 million
and $619.9 million for the first quarters of 2016 and 2015,
respectively.
Large Case Pensions segment results
Large Case Pensions, which manages a variety of discontinued and
other retirement and savings products, primarily for qualified
pension plans, reported:
- Operating loss (1) was $.3 million for
the first quarter of 2016 compared with operating earnings of $2.1
million for the first quarter of 2015, primarily reflecting lower
net investment income.
- Net income (2) was $1.3 million for the
first quarter of 2016 compared with $2.5 million for the first
quarter of 2015.
- Operating revenues (3) were $64.7
million for the first quarter of 2016 compared with $85.7 million
for the first quarter of 2015, primarily reflecting lower net
investment income. Total revenues were $67.1 million and $86.3
million for the first quarters of 2016 and 2015, respectively.
Aetna's conference call to discuss first-quarter 2016 results
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
Investor Information website at www.aetna.com/investor. Financial,
statistical and other information, including GAAP reconciliations,
related to the conference call also will be available on Aetna's
Investor Information website.
The conference call also can be accessed by dialing
1-877-709-8150, or +1-201-689-8354 for international callers. The
company suggests participants dial in approximately 10 minutes
before the call. No access code is required. 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
1-877-660-6853, or +1-201-612-7415 for international callers. The
replay conference ID is 13633794. Telephone replays will be
available until 11 p.m. ET on May 12, 2016.
About Aetna
Aetna is one of the nation's leading diversified health care
benefits companies, serving an estimated 46.5 million people with
information and resources to help them make better informed
decisions about their health care. Aetna offers a broad range of
traditional, voluntary and consumer-directed health insurance
products and related services, including medical, pharmacy, dental,
behavioral health, group life and disability plans, and medical
management capabilities, Medicaid health care management services,
workers' compensation administrative services and health
information technology products and services. Aetna's customers
include employer groups, individuals, college students, part-time
and hourly workers, health plans, health care providers,
governmental units, government-sponsored plans, labor groups and
expatriates. For more information, see www.aetna.com and learn
about how Aetna is helping to build a healthier world.
@AetnaNews
Consolidated Statements of Income
For the Three Months Ended March 31,
(Millions) 2016
2015 Revenue:
Health care premiums $ 13,469.0 $ 12,940.1 Other premiums
540.1 538.0 Fees and other revenue 1,467.0 1,375.0 Net investment
income 217.7 232.9 Net realized capital (losses) gains
(.4 ) 8.1
Total revenue 15,693.4
15,094.1
Benefits and
expenses: Health care costs 10,847.7 10,240.5 Current and
future benefits 528.9 528.1 Operating expenses: Selling expenses
421.1 414.9 General and administrative expenses
2,442.5 2,400.6
Total operating expenses 2,863.6 2,815.5 Interest expense
101.8 80.2 Amortization of other acquired intangible assets
62.8 63.2 Total
benefits and expenses 14,404.8
13,727.5 Income before
income taxes 1,288.6 1,366.6 Income taxes
560.7 590.3 Net
income including non-controlling interests
727.9 776.3 Less:
Net income (loss) attributable to non-controlling interests
1.3 (1.2 ) Net income
attributable to Aetna $ 726.6
$ 777.5
Summary
of Results For the
Three Months Ended March 31, (Millions)
2016 2015
Operating earnings (1) $ 810.8 $ 844.3 Transaction and
integration-related costs, net of tax (42.9 ) (30.7 ) Amortization
of other acquired intangible assets, net of tax (40.8 ) (41.1 ) Net
realized capital (losses) gains, net of tax
(.5 ) 5.0 Net income (2) (GAAP measure)
$ 726.6 $ 777.5
Weighted average common shares - basic
350.7 349.5
Weighted average common shares - diluted 353.1
352.7
Per Common
Share
Operating earnings (1) $ 2.30 $ 2.39 Transaction and
integration-related costs, net of tax (.12 ) (.09 ) Amortization of
other acquired intangible assets, net of tax (.12 ) (.12 ) Net
realized capital gains, net of tax —
.02 Net income (2) (GAAP measure)
$ 2.06 $ 2.20
Segment Information (7)
For the Three
Months Ended March 31, (Millions)
2016 2015 Health
Care: Operating revenue (3) (excludes net realized capital
(losses) gains) $ 15,020.3 $ 14,383.3 Net realized capital (losses)
gains (6.0 ) 4.6
Total revenue (GAAP measure) $ 15,014.3
$ 14,387.9 Commercial Medical
Benefit Ratio: Premiums $ 6,964.3
$ 7,209.7 Health care costs
$ 5,419.6 $ 5,583.0
Commercial MBR (GAAP measure) 77.8 % 77.4 %
Government Medical Benefit Ratio: Premiums $
6,504.7 $ 5,730.4 Health care
costs $ 5,428.1 $
4,657.5 Government MBR (GAAP measure) 83.4 % 81.3 %
Total Medical Benefit Ratio: Premiums $
13,469.0 $ 12,940.1 Health care
costs $ 10,847.7 $
10,240.5 Total MBR (GAAP measure) 80.5 % 79.1 %
Operating earnings (1) $ 832.0 $ 835.6 Transaction and
integration-related costs, net of tax (28.2 ) (30.7 ) Amortization
of other acquired intangible assets, net of tax (40.8 ) (41.1 ) Net
realized capital (losses) gains, net of tax
(4.2 ) 2.7 Net income (2) (GAAP
measure) $ 758.8 $
766.5
Segment Information continued
(7)
For the Three Months Ended March 31,
(Millions) 2016
2015 Group Insurance: Operating revenue
(3) (excludes net realized capital gains) $ 608.8 $ 617.0 Net
realized capital gains 3.2
2.9 Total revenue (GAAP measure)
$ 612.0 $ 619.9
Operating earnings (1) $ 21.3 $ 43.9 Net realized
capital gains, net of tax 2.1
1.9 Net income (2) (GAAP measure)
$ 23.4 $
45.8
Large Case Pensions: Operating revenue
(3) (excludes net realized capital gains) $ 64.7 $ 85.7 Net
realized capital gains 2.4
.6 Total revenue (GAAP measure)
$ 67.1 $ 86.3
Operating (loss) earnings (1) $ (.3 ) $ 2.1 Net
realized capital gains, net of tax 1.6
.4 Net income (2) (GAAP measure)
$ 1.3 $ 2.5
Corporate Financing: (8)
Operating loss (1) $ (42.2 ) $ (37.3 ) Transaction-related costs,
net of tax (14.7 )
— Net loss (2) (GAAP measure) $ (56.9 )
$ (37.3 )
Total Company:
Operating revenue (3) (excludes net realized capital (losses)
gains) (A) $ 15,693.8 $ 15,086.0 Net realized capital (losses)
gains (.4 ) 8.1
Total revenue (GAAP measure) (B) $
15,693.4 $ 15,094.1
Operating expenses (C) $ 2,820.8 $ 2,769.9 Transaction and
integration-related costs 42.8
45.6 Total operating expenses (GAAP
measure) (D) $ 2,863.6
$ 2,815.5
Operating Expense
Ratios: Operating expense ratio (5) (C)/(A) 18.0 % 18.4 % Total
company expense ratio (D)/(B) (GAAP measure) 18.2 % 18.7 %
Membership
March
31,
December 31,
March 31, (Thousands)
2016 2015
2015 Medical
Membership: Commercial 18,723 19,370 19,859 Medicare Advantage
1,332 1,251 1,228 Medicare Supplement 612 566 488 Medicaid (9)
2,322 2,300
2,095 Total
Medical Membership 22,989
23,487 23,670
Consumer-Directed Health Plans (10)
4,320 4,029
3,981
Dually-Eligible for Medicare and Medicaid (9)
26 27
23
Dental Membership:
Total Dental Membership 14,305
14,634
14,595 (a)
Pharmacy Benefit Management
Membership: Commercial 9,767 10,237 10,789 Medicare
Prescription Drug Plan (stand-alone) 1,939 1,466 1,435 Medicare
Advantage Prescription Drug Plan 934 863 850 Medicaid (9)
2,602 2,587
2,351 Total Pharmacy
Benefit Management Services 15,242
15,153
15,425
(a) Dental ASC membership at March 31, 2015 has been revised to
reflect a reduction of approximately 1 million Dental ASC members,
as the applicable Medicaid ASC members did not have a Dental ASC
product at such date. This revision did not affect Aetna's
financial statements.
Operating Margins
For the Three Months Ended March 31,
(Millions) 2016
2015 Reconciliation to Income Before Income
Taxes: Operating earnings (1) before income taxes, excluding
interest expense (A) $ 1,496.4 $ 1,547.5 Interest expense * (79.2 )
(80.2 ) Transaction and integration-related costs (65.4 ) (45.6 )
Amortization of other acquired intangible assets (62.8 ) (63.2 )
Net realized capital (losses) gains (.4 )
8.1 Income before income taxes (GAAP
measure) $ 1,288.6
$ 1,366.6
Reconciliation to Net Income:
Operating earnings,(1) excluding interest expense, net of tax $
862.3 $ 896.4 Interest expense, net of tax * (51.5 ) (52.1 )
Transaction and integration-related costs, net of tax (42.9 ) (30.7
) Amortization of other acquired intangible assets, net of tax
(40.8 ) (41.1 ) Net realized capital (losses) gains, net of tax
(.5 ) 5.0 Net
income (2) (GAAP measure) (B) $ 726.6
$ 777.5
Reconciliation of
Revenue: Operating revenue (3) (excludes net realized capital
(losses) gains) (C) $ 15,693.8 $ 15,086.0 Net realized capital
(losses) gains (.4 ) 8.1
Total revenue (GAAP measure) (D) $
15,693.4 $ 15,094.1
Operating and Net Income Margins: Pretax operating margin
(6) (A)/(C) 9.5 % 10.3 % After-tax net income margin (B)/(D) (GAAP
measure) 4.6 % 5.2 %
*Interest expense of $51.5 million ($79.2 million pretax), for
the three months ended March 31, 2016 excludes costs associated
with the bridge credit agreement and term loan credit agreement
executed in connection with the proposed acquisition of Humana Inc.
(“Humana”). These costs are included within transaction and
integration-related costs.
(1) Operating earnings and operating earnings per share exclude
from net income attributable to Aetna and operating expenses and
operating revenues exclude, as applicable, amortization of other
acquired intangible assets, net realized capital gains or losses
and other items, if any, that neither relate to the ordinary course
of Aetna's business nor reflect Aetna's underlying business
performance. Although the excluded items may recur, management
believes that operating earnings, operating earnings per share,
operating revenues, operating expenses and the operating expense
ratio provide a more useful comparison of Aetna's underlying
business performance from period to period. Operating earnings is
the measure reported to the Chief Executive Officer for purposes of
assessing financial performance and making operating decisions,
such as the allocation of resources among Aetna's business
segments. Non-GAAP financial measures Aetna discloses, such as
operating earnings, operating earnings per share, operating
revenues, operating expenses, pretax operating margin and the
operating expense ratio, should not be considered a substitute for,
or superior to, financial measures determined or calculated in
accordance with U.S. generally accepted accounting principles
(“GAAP”).
For the periods covered in this press release, the following
items are excluded from operating earnings, operating expenses and
operating revenues, as applicable, because Aetna believes they
neither relate to the ordinary course of Aetna's business nor
reflect Aetna's underlying business performance:
- Aetna incurred transaction and
integration-related costs of $42.9 million ($65.4 million pretax)
during the three months ended March 31, 2016, related to the
acquisitions of Coventry Health Care, Inc. (“Coventry”) and bswift
LLC ("bswift") and the proposed acquisition of Humana. Aetna
incurred transaction and integration-related costs of $30.7 million
($45.6 million pretax) during the three months ended March 31,
2015, related to the acquisitions of Coventry, the InterGlobal
Group ("InterGlobal") and bswift. Transaction costs include
advisory, legal and other professional fees which are not
deductible for tax purposes and are reflected in Aetna's GAAP
Consolidated Statements of Income in general and administrative
expenses, as well as the cost of the bridge credit agreement and
the term loan credit agreement executed in connection with the
proposed acquisition of Humana, which are reflected in Aetna's GAAP
Consolidated Statements of Income in interest expense.
- Other acquired intangible assets relate
to Aetna's acquisition activities and are amortized over their
useful lives. However, this amortization does not directly relate
to the underwriting or servicing of products for customers and is
not directly related to the core performance of Aetna's business
operations.
- Net 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. However, 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 Aetna's business
operations.
For a reconciliation of these items to financial measures
calculated under GAAP, refer to the tables on pages 8 through 10
and 12 of this press release.
(2) Net Income (Loss) refers to net income (loss) attributable
to Aetna reported in Aetna's GAAP Consolidated Statements of
Income. Unless otherwise indicated, all references in this press
release to operating earnings, operating earnings per share, net
income (loss) and net income per share are based upon net income
(loss) attributable to Aetna, which excludes amounts attributable
to non-controlling interests.
(3) Operating revenue excludes net realized capital gains and
losses as noted in (1) above. Refer to the tables on pages 9, 10
and 12 of this press release for a reconciliation of operating
revenue to total revenue calculated under GAAP.
(4) Projected 2016 operating earnings per share exclude from net
income estimated after-tax amortization of other acquired
intangible assets of approximately $160 million ($247 million
pretax), projected integration-related costs related to the
Coventry and bswift acquisitions and the proposed acquisition of
Humana, projected transaction-related costs related to the proposed
acquisition of Humana, any future net realized capital gains and
losses and other items, if any, that neither relate to the ordinary
course of Aetna's business nor reflect Aetna's underlying business
performance. After-tax amortization of other acquired intangible
assets relates to Aetna's acquisition activities, including
Coventry, InterGlobal and bswift. Aetna is not able to project the
amount of future net realized capital gains and losses or any such
other items (other than estimated after-tax amortization of other
acquired intangible assets and projected transaction and
integration-related costs related to the Coventry and bswift
acquisitions and the proposed acquisition of Humana) and therefore
cannot reconcile projected operating earnings per share to
projected net income per share in any period. Projected full-year
2016 operating earnings per share reflect approximately 354 million
weighted average diluted shares. The projected information in this
press release does not include or reflect any benefit or impact
from or any transaction or other costs associated with Aetna's
proposed acquisition of Humana.
(5) The operating expense ratio excludes net realized capital
gains and losses and other items, if any, that are excluded from
operating revenues or operating expenses, as noted in (1) above.
For a reconciliation of this metric to the comparable GAAP measure
refer to page 10 of this press release.
(6) In order to provide useful information regarding Aetna's
profitability on a basis comparable to others in the industry,
without regard to financing decisions, income taxes or amortization
of other acquired intangible assets (each of which may vary for
reasons not directly related to the performance of the underlying
business), Aetna's pretax operating margin is based on operating
earnings excluding interest expense and income taxes. Management
also uses pretax operating margin to assess Aetna's performance,
including performance versus competitors.
(7) Operating revenue and operating expense information is
presented before income taxes. Operating earnings information is
presented net of income taxes.
(8) Aetna's Corporate Financing segment is not a business
segment. It is added to Aetna's business segments to reconcile
segment reporting to Aetna's consolidated results. The net loss of
the Corporate Financing segment includes interest expense on
Aetna's outstanding debt and the financing components of Aetna's
pension and other postretirement employee benefit plan expenses
(benefits). As described in (1) above, the operating earnings of
the Corporate Financing segment exclude other items, if any, that
neither relate to the ordinary course of Aetna's business nor
reflect Aetna's underlying business performance.
(9) Medicaid membership includes members who are dually-eligible
for both Medicare and Medicaid.
(10) Represents members in consumer-directed health plans
included in Commercial medical membership.
Cautionary Statement Regarding Forward-Looking
StatementsThis press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. You can generally identify forward-looking
statements by the use of forward-looking terminology such as
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“explore,” “evaluate,” “intend,” “may,” “might,” “plan,”
“potential,” “predict,” “project,” “seek,” “should,” or “will,” or
the negative thereof or other variations thereon or comparable
terminology. These forward-looking statements are only predictions
and involve known and unknown risks and uncertainties, many of
which are beyond Aetna’s and Humana’s control.
Statements in this press release regarding Aetna that are
forward-looking, including Aetna’s projections as to operating
earnings per share, the closing date of the proposed acquisition of
Humana, amortization of other acquired intangible assets and
weighted average diluted shares, are based on management’s
estimates, assumptions and projections, and are subject to
significant uncertainties and other factors, many of which are
beyond Aetna’s and Humana’s control. Important risk factors could
cause actual future results and other future events to differ
materially from those currently estimated by management, including,
but not limited to: the timing to consummate the proposed
acquisition of Humana; the risk that a condition to closing of the
proposed acquisition of Humana may not be satisfied; the risk that
a regulatory approval that may be required for the proposed
acquisition of Humana is delayed, is not obtained or is obtained
subject to conditions that are not anticipated; the outcome of
various litigation matters related to the proposed acquisition of
Humana; Aetna’s ability to achieve the synergies and value creation
projected to be realized following the completion of the proposed
acquisition of Humana; Aetna’s ability to promptly and effectively
integrate Humana’s businesses; the diversion of management time on
Humana acquisition-related issues; unanticipated increases in
medical costs (including increased intensity or medical utilization
as a result of flu or otherwise; changes in membership mix to
higher cost or lower-premium products or membership adverse
selection; medical cost increases resulting from unfavorable
changes in contracting or re-contracting with providers (including
as a result of provider consolidation and/or integration); and
increased pharmacy costs (including in Aetna’s and/or Humana’s
health insurance exchange products)); the profitability of Aetna’s
and Humana’s public health insurance exchange products, where
membership (particularly members who join during special election
periods) may have more adverse health status and/or higher medical
benefit utilization than Aetna and/or Humana projected; uncertainty
related to Aetna’s and Humana’s accruals for health care reform’s
reinsurance, risk adjustment and risk corridor programs (“3R’s”);
uncertainty related to the funding for and final reconciliations
with respect to health care reform's risk management and subsidy
programs; the implementation of health care reform legislation,
including collection of health care reform fees, assessments and
taxes through increased premiums; adverse legislative, regulatory
and/or judicial changes to or interpretations of existing health
care reform legislation and/or regulations (including those
relating to minimum medical loss ratio (“MLR”) rebates); the
implementation of health insurance exchanges; Aetna’s and Humana’s
ability to offset Medicare Advantage and PDP rate pressures; and
changes in Aetna’s and Humana’s future cash requirements, capital
requirements, results of operations, financial condition and/or
cash flows. Health care reform will continue to significantly
impact Aetna’s business operations and financial results, including
Aetna’s pricing and medical benefit ratios. Key components of the
legislation will continue to be phased in through 2020, and Aetna
will be required to dedicate material resources and incur material
expenses during 2016 to implement health care reform. Significant
parts of the legislation, including aspects of public health
insurance exchanges, nondiscrimination requirements, reinsurance,
risk corridor and risk adjustment, continue to evolve through the
promulgation of regulations and guidance at the federal level. In
addition, pending efforts in the U.S. Congress to amend or restrict
funding for various aspects of health care reform and pending
litigation challenging aspects of the law continue to create
additional uncertainty about the ultimate impact of health care
reform. As a result, many of the impacts of health care reform will
not be known for the next several years. Other important risk
factors include: adverse changes in health care reform and/or other
federal or state government policies or regulations as a result of
health care reform or otherwise (including legislative, judicial or
regulatory measures that would affect Aetna’s and/or Humana’s
business model, restrict funding for or amend various aspects of
health care reform, limit Aetna’s and/or Humana’s ability to price
for the risk it assumes and/or reflect reasonable costs or profits
in its pricing, such as mandated minimum medical benefit ratios, or
eliminate or reduce ERISA pre-emption of state laws (increasing
Aetna’s and/or Humana’s potential litigation exposure)); adverse
and less predictable economic conditions in the U.S. and abroad
(including unanticipated levels of, or increases in the rate of,
unemployment); reputational or financial issues arising from
Aetna’s and/or Humana’s social media activities, data security
breaches, other cybersecurity risks or other causes; Aetna’s
ability to diversify Aetna’s sources of revenue and earnings
(including by developing, operating and expanding Aetna's consumer
business and expanding Aetna’s foreign operations), transform
Aetna’s business model, develop new products and optimize Aetna’s
business platforms; the success of Aetna’s Healthagen® (including
Accountable Care Solutions and health information technology)
initiatives; adverse changes in size, product or geographic mix or
medical cost experience of membership; managing executive
succession and key talent retention, recruitment and development;
failure to achieve and/or delays in achieving desired rate
increases and/or profitable membership growth due to regulatory
review or other regulatory restrictions, the difficult economy
and/or significant competition, especially in key geographic areas
where membership is concentrated, including successful protests of
business awarded to Aetna and/or Humana; failure to adequately
implement health care reform; the outcome of various litigation and
regulatory matters, including audits, challenges to Aetna’s and/or
Humana’s minimum MLR rebate methodology and/or reports, guaranty
fund assessments, intellectual property litigation and litigation
concerning, and ongoing reviews by various regulatory authorities
of, certain of Aetna’s and/or Humana’s payment practices with
respect to out-of-network providers, other providers and/or life
insurance policies; Aetna’s ability to integrate, simplify, and
enhance Aetna’s existing products, processes and information
technology systems and platforms to keep pace with changing
customer and regulatory needs; Aetna’s ability to successfully
integrate Aetna’s businesses (including Humana, Coventry, bswift
LLC and other businesses Aetna may acquire in the future) and
implement multiple strategic and operational initiatives
simultaneously; Aetna’s and/or Humana’s ability to manage health
care and other benefit costs; adverse program, pricing, funding or
audit actions by federal or state government payors, including as a
result of sequestration and/or curtailment or elimination of the
Centers for Medicare & Medicaid Services’ star rating bonus
payments; Aetna’s ability to reduce administrative expenses while
maintaining targeted levels of service and operating performance;
failure by a service provider to meet its obligations to Aetna or
Humana; Aetna’s and Humana’s ability to develop and maintain
relationships (including collaborative risk-sharing agreements)
with providers while taking actions to reduce medical costs and/or
expand the services each company offers; Aetna’s ability to
demonstrate that Aetna’s products and processes lead to access to
quality affordable care by Aetna’s members; Aetna’s and/or Humana’s
ability to maintain their relationships with third-party brokers,
consultants and agents who sell their products; increases in
medical costs or Group Insurance claims resulting from any
epidemics, acts of terrorism or other extreme events; changes in
medical cost estimates due to the necessary extensive judgment that
is used in the medical cost estimation 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; a downgrade in Aetna’s financial ratings;
and adverse impacts from any failure to raise the U.S. Federal
government’s debt ceiling or any sustained U.S. Federal government
shut down. For more discussion of important risk factors that may
materially affect Aetna, please see the risk factors contained in
Aetna’s 2015 Annual Report on Form 10-K (“Aetna’s 2015 Annual
Report”) on file with the Securities and Exchange Commission
("SEC"). For more discussion of important risk factors that may
materially affect Humana, please see the risk factors contained in
Humana’s 2015 Annual Report on Form 10-K (“Humana’s 2015 Annual
Report”) on file with the SEC. You should also read Aetna’s 2015
Annual Report and Aetna’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2016, when filed with the SEC, for a
discussion of Aetna’s historical results of operations and
financial condition. You should also read Humana’s 2015 Annual
Report and Humana’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2016, when filed with the SEC, for a discussion of
Humana’s historical results of operations and financial
condition.
No assurances can be given that any of the events anticipated by
the forward-looking statements will transpire or occur, or if any
of them do occur, what impact they will have on the results of
operations, financial condition or cash flows of Aetna or Humana.
Aetna does not assume any duty to update or revise forward-looking
statements, whether as a result of new information, future events
or otherwise, as of any future date.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160428005759/en/
AetnaMedia Contact:T.J. Crawford,
212-457-0583crawfordt2@aetna.comorInvestor Contact:Joe
Krocheski, 860-273-0896krocheskij@aetna.com
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