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Strong 2Q Earnings for Aetna, Guides Up

Zacks Equity Research

Aetna Inc. ( AET) reported second-quarter 2013 earnings of $1.52 per share, up 13 cents per share from the Zacks Consensus Estimate of $1.39 per share. Earnings also increased 16% year over year.


Including one time items net income came in at $1.49 per share, up 13% year over year.


Aetna’s total revenue for the reported quarter grew 31% year over year to $11.5 billion, led by higher Health Care premiums in Commercial, Medicare and Medicaid businesses. Reported revenue was a tad lower than the Zacks Consensus Estimate of $11.8 billion.


Operating expenses were $2.04 billion, up 27.4% year over year. Operating expense ratio was 17.7% compared with 18.7% in the prior-year quarter.


Pre-tax operating margin was 8.4% for the reported quarter, down 50 basis points year over year.


Segmental Performance


Aetna’s Health Care segment recorded revenues of $10.87 billion, up 33% year over year.


Total medical membership was 21.968 million as of Jun 30, 2013. This signifies a yearly increase of 3.939 million members.


Operating earnings increased by 26% year over year to $559.2 million, largely attributable to higher underwriting margins in its Commercial business.


Aetna’s Group Insurance revenues climbed 11% year over year to $582.4 million. The segment’s operating earnings decreased by 35% year over year to $29.9 million reflecting lower underwriting margin in Life business.


At Large Case Pensions, revenues slipped 0.7% year over year to $106.3 million. Operating earnings increased by 2.6% year over year to $3.8 million.


In the reported quarter, Aetna spent $440.6 million to buyback 7.2  million shares.


2013 Guidance


Following a better-than-expected earnings performance, Aetna raised its full year 2013 earnings guidance to a range of $5.80 to $5.90, from its earlier forecast of $5.50 to $5.60.


Aetna currently retains a Zacks Rank #2 (Buy). Other players UnitedHealth Group Inc. ( UNH), WellPoint Inc. ( WLP), Molina Healthcare Inc. ( MOH) all reported second quarter earnings ahead of the Zacks Consensus Estimates.

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