Aetna Reports Second-Quarter 2011 Results

Wednesday, July 27, 2011
Dateline City: HARTFORD, Conn.
  • Second-quarter 2011 operating earnings per share (1) were $1.35; compared with the Thomson-First Call mean of $1.08
  • Net income per share was $1.39
  • Total medical benefit ratio was 79.7 percent; 82.5 percent excluding prior-period reserve development
  • Medical membership totaled 18.2 million members at June 30, 2011
  • Aetna now projects full-year 2011 operating earnings per share to be $4.60 to $4.70 (2)

HARTFORD, Conn.–(BUSINESS WIRE)–Aetna (NYSE: AET) today announced second-quarter 2011 operating earnings (1) of $522.8 million, or $1.35 per share, a per share increase of 29 percent over 2010. The increase in the second quarter operating earnings was largely the result of higher Commercial underwriting margins from improved underlying performance, partially offset by the effect of lower Commercial Insured membership in 2011. Second-quarter results included favorable prior-period reserve development of $.31 per share, primarily from first quarter 2011 incurred health care costs. Second-quarter net income per share was $1.39.

For the first half of 2011, operating earnings per share were $2.78, including $.32 per share of favorable prior-years reserve development primarily from 2010 incurred health care costs. Net income per share was $2.88 for the first half of 2011.

Second Quarter Financial Results at a Glance
               
Three Months Ended June 30,
(Millions, except per share results)         2011     2010     Change
Revenue, excluding net realized capital gains (3) $ 8,323.0 $ 8,502.4 (2 )%
Operating earnings 522.8 450.2 16 %
Net income 536.7 491.0 9 %
 
Per share results:
Operating earnings $ 1.35 $ 1.05 29 %
Net income 1.39 1.14 22 %
 
Weighted average common shares – diluted           387.3       430.2      

“Aetna’s second-quarter financial results reflect strong operating fundamentals across the enterprise,” said Mark T. Bertolini, chairman, CEO and president. “Three main factors account for our success: disciplined pricing and medical cost management; lower than anticipated utilization of health care services by our members; and strong cash flow generation. The result has been better-than-projected financial results in the first half of 2011.

“Our long-term strategy remains focused on delivering profitable growth and consistent performance through a diversified portfolio of businesses. Our business units are generally performing very well as we acquire new capabilities to enhance our value proposition. I am pleased with the initial progress of our Accountable Care Solutions model for collaboration with high-quality health systems such as Carilion Clinic, Heartland Health and Emory Healthcare. We believe this new model will help create the transformational change people are looking for in health care,” said Bertolini.

“Our strong financial position and prudent capital management have allowed us to capitalize on marketplace opportunities,” said Joseph M. Zubretsky, senior executive vice president and CFO. “We have deployed capital to fund several strategic acquisitions in recent quarters, as well as share repurchases and an increased dividend. We believe we can benefit both our customers and shareholders by continuing to invest to strengthen our core business and create new growth opportunities.

“Based on our results and our outlook for the balance of the year, we now project full-year 2011 operating earnings per share of $4.60 to $4.70.”

Health Care business 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 of $512.9 million for the second quarter of 2011, compared with $467.4 million for the corresponding period in 2010. The increase in operating earnings was primarily due to higher Commercial underwriting margins from improved underlying performance, partially offset by the effect of lower Commercial Insured membership in 2011. Operating earnings included approximately $121.3 million and $127.6 million, after tax, of favorable prior-period reserve development in the second quarter of 2011 and 2010, respectively.
  • Total revenue for the second quarter of 2011 was $7.7 billion compared with $7.9 billion for the second quarter of 2010. The decrease was primarily attributable to lower Commercial Insured membership in 2011 as well as changes in the customer market, product and geographic mix of business, partially offset by premium rate increases.
  • Medical benefit ratios (“MBRs”) for second quarter 2011 and 2010 were as follows:
                                 

2011

       

2010

Commercial                                 77.9%         80.1%
Medicare 84.6% 86.4%
Medicaid                                 87.2%         89.2%
Total                                 79.7%         81.8%
  • Excluding prior-period reserve development, the Commercial MBR was 81.2 percent and 83.2 percent for the second quarter of 2011 and 2010, respectively. Commercial medical costs include favorable development of prior-period health care cost estimates of $167.5 million and $160.4 million in the second quarter of 2011 and 2010, respectively.
  • Excluding prior-period reserve development, the Medicare MBR was 85.9 percent and 88.7 percent for the second quarter of 2011 and 2010, respectively. Medicare medical costs include favorable development of prior-period health care cost estimates of $17.6 million and $33.4 million in the second quarter of 2011 and 2010, respectively.

Prior-period reserve development for the second quarter of 2011 relates primarily to first quarter 2011 incurred health care costs.

  • Excluding the acquisition of Prodigy Health Group, sequentially, second-quarter 2011 medical membership decreased by 76 thousand to 17.718 million; dental membership decreased by 95 thousand to 13.394 million and pharmacy benefit management services membership decreased by 79 thousand to 8.486 million. The acquisition of Prodigy Health Group on June 28, 2011 added approximately 523 thousand medical members, 392 thousand dental members and 292 thousand pharmacy benefit management services members.
  • Net income was $522.6 million for the second quarter of 2011, compared with $494.6 million for the second quarter of 2010.

    Prior-years reserve development was $196.6 million and $150.3 million in the first half of 2011 and 2010, respectively. 2011 prior-years reserve development relates primarily to 2010 incurred health care costs, and 2010 prior-years reserve development relates primarily to 2009 incurred health care costs.

Group Insurance business results

Group Insurance, which includes group life, disability and long-term care products, reported:

  • Operating earnings of $44.4 million for the second quarters of both 2011 and 2010.
  • Net income of $47.3 million for the second quarter of 2011, compared with $50.5 million for the second quarter of 2010.
  • Revenues (3) for the second quarter of 2011 were $499.5 million, compared with $517.0 million for the second quarter of 2010. Second quarter total revenue, which includes net realized capital gains, was $503.9 million in 2011 and $526.5 million in 2010.

Large Case Pensions business results

Large Case Pensions, which manages a variety of discontinued and other retirement and savings products, primarily qualified pension plans, reported:

  • Operating earnings of $6.2 million for the second quarter of 2011, compared with $6.1 million for the second quarter of 2010.
  • Net income of $7.5 million for the second quarter of 2011, compared with net income of $13.6 million for the second quarter of 2010.

Total company results

  • Total Revenues were $8.3 billion for the second quarter of 2011 compared with $8.5 billion for the second quarter of 2010.
  • Operating Expenses (1) were $1.6 billion for the second quarter of 2011, $13.6 million higher than the second quarter of 2010. The operating expense ratio (4) was 19.1 percent for the second quarter of 2011 and 18.6 percent for the second quarter of 2010. Including net realized capital gains and litigation-related insurance proceeds recorded in 2010, these percentages were 19.1 percent and 18.2 percent for the second quarter of 2011 and 2010, respectively.
  • Corporate Financing Interest Expense was $39.9 million and $39.4 million after tax for the second quarter of 2011 and 2010, respectively.
  • Net Income was $536.7 million for the second quarter of 2011 compared with $491.0 million for the second quarter of 2010.
  • Pre-tax Operating Margin (5) was 10.7 percent for the second quarter of 2011 compared with 9.2 percent for the second quarter of 2010. For the second quarter of 2011, the after-tax net income margin was 6.4 percent compared with 5.7 percent for 2010.
  • Share Repurchases totaled 11.2 million shares at a cost of $485 million in the second quarter of 2011.

Aetna’s conference call to discuss second quarter 2011 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 link on the Internet at www.aetna.com. Financial, statistical and other information, including GAAP reconciliations, related to the conference call also will be available on Aetna’s Investor Information web site.

The conference call also can be accessed by dialing 800-753-0420 or 913-312-0687 for international callers. The company suggests participants dial in approximately 10 minutes before the call. The access code is 1077594. 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 1077594. Telephone replays will be available from 11 a.m. ET on July 27, 2011 until 11 p.m. ET on August 10, 2011.

About Aetna

Aetna is one of the nation’s leading diversified health care benefits companies, serving approximately 36.5 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 and health care management services for Medicaid plans. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, governmental units, government-sponsored plans, labor groups and expatriates. For more information, see www.aetna.com.

Consolidated Statements of Income
                     
 
For the Three Months For the Six Months
Ended June 30, Ended June 30,
(Millions)           2011     2010     2011  

 

2010
Revenue:
Health care premiums $ 6,733.4 $ 6,915.2 $ 13,484.0 $ 13,810.3
Other premiums 451.8 460.5 897.1 935.2
Fees and other revenue 896.5 873.0 1,796.1 1,772.8
Net investment income 241.3 253.7 493.9 528.9
Net realized capital gains             21.4       43.4       61.1       120.1
Total revenue             8,344.4       8,545.8       16,732.2       17,167.3
 
Benefits and expenses:
Health care costs 5,366.8 5,658.6 10,714.8 11,349.6
Current and future benefits 477.7 480.7 963.2 1,007.7
Operating expenses:
Selling expenses 267.2 302.5 557.9 624.0
General and administrative expenses             1,324.5       1,255.6       2,597.3       2,451.3
Total operating expenses 1,591.7 1,558.1 3,155.2 3,075.3
Interest expense 61.5 60.7 127.6 121.6
Amortization of other acquired intangible assets             25.6       24.2       51.9       48.6
Total benefits and expenses             7,523.3       7,782.3       15,012.7       15,602.8
 
Income before income taxes 821.1 763.5 1,719.5 1,564.5
Income taxes             284.4       272.5       596.8       510.9
Net income           $ 536.7     $ 491.0     $ 1,122.7     $ 1,053.6
 
Summary of Results
                 
 
For the Three Months For the Six Months
Ended June 30, Ended June 30,
(Millions)       2011     2010     2011     2010
Operating earnings, excluding prior-period reserve development $ 401.5 $ 322.6

Favorable development of prior-period health care cost estimates

        121.3         127.6
Operating earnings         522.8         450.2 $ 1,083.0 $ 880.8
Litigation-related insurance proceeds 13.0 58.5
Net realized capital gains         13.9         27.8         39.7         114.3
Net income (GAAP measure)       $ 536.7       $ 491.0       $ 1,122.7       $ 1,053.6
 
Weighted average common shares – basic         379.2         423.0         381.3         427.2
 
Weighted average common shares – diluted         387.3         430.2         389.2         434.9
 
Per Common Share                
Operating earnings, excluding prior-period reserve development $ 1.04 $ .75

Favorable development of prior-period health care cost estimates

        .31         .30
Operating earnings         1.35         1.05 $ 2.78 $ 2.03
Litigation-related insurance proceeds .03 .13
Net realized capital gains         .04         .06         .10         .26
Net income (GAAP measure)       $ 1.39       $ 1.14       $ 2.88       $ 2.42
 
Segment Information (6)
                   
For the Three Months For the Six Months
Ended June 30, Ended June 30,
(Millions)       2011     2010     2011     2010
Health Care:
Revenue, excluding net realized capital gains $ 7,691.4 $ 7,864.3 $ 15,401.1 $ 15,737.5
Net realized capital gains         15.0           22.4           48.7           67.8  
Total revenue (GAAP measure)       $ 7,706.4         $ 7,886.7         $ 15,449.8         $ 15,805.3  
 
Commercial Medical Benefit Ratio:
Premiums       $ 5,031.4         $ 5,148.4         $ 10,045.0         $ 10,291.8  
Health care costs (GAAP measure) $ 3,917.9 $ 4,124.1 $ 7,777.3         $ 8,293.5  

Favorable development of prior-period health care cost estimates

        167.5           160.4  
Health care costs, excluding prior-period development       $ 4,085.4         $ 4,284.5  
 
Commercial MBR (GAAP measure) 77.9 % 80.1 % 77.4 % 80.6 %
Commercial MBR, excluding prior-period reserve development 81.2 % 83.2 %
 
Medicare Medical Benefit Ratio:
Premiums       $ 1,358.3         $ 1,507.2         $ 2,767.1         $ 3,026.5  
Health care costs (GAAP measure) $ 1,149.2 $ 1,302.9 $ 2,347.5         $ 2,624.9  

Favorable development of prior-period health care cost estimates

        17.6           33.4  
Health care costs, excluding prior-period development       $ 1,166.8         $ 1,336.3  
 
Medicare MBR (GAAP measure) 84.6 % 86.4 % 84.8 % 86.7 %
Medicare MBR, excluding prior-period reserve development 85.9 % 88.7 %
 
Total Medical Benefit Ratio:
Premiums       $ 6,733.4         $ 6,915.2         $ 13,484.0         $ 13,810.3  
Health care costs (GAAP measure) $ 5,366.8 $ 5,658.6 $ 10,714.8         $ 11,349.6  

Favorable development of prior-period health care cost estimates

        188.1           198.6  
Health care costs, excluding prior-period development       $ 5,554.9         $ 5,857.2  
 
Total MBR (GAAP measure) 79.7 % 81.8 % 79.5 % 82.2 %
Total MBR, excluding prior-period reserve development 82.5 % 84.7 %
 
Operating earnings $ 512.9 $ 467.4 $ 1,068.2 $ 927.5
Litigation-related insurance proceeds 13.0 58.5
Net realized capital gains         9.7           14.2           31.6           70.5  
Net income (GAAP measure)       $ 522.6         $ 494.6         $ 1,099.8         $ 1,056.5  
 
Segment Information continued (6)
                 
 
For the Three Months For the Six Months
Ended June 30, Ended June 30,
(Millions)       2011     2010     2011     2010
 
Group Insurance:
Revenue, excluding net realized capital gains $ 499.5 $ 517.0 $ 1,003.9 $ 1,046.9
Net realized capital gains         4.4           9.5           10.9           35.7  
Total revenue (GAAP measure)       $ 503.9         $ 526.5         $ 1,014.8         $ 1,082.6  
 
Operating earnings $ 44.4 $ 44.4 $ 87.3 $ 72.9
Net realized capital gains         2.9           6.1           7.1           31.0  
Net income (GAAP measure)       $ 47.3         $ 50.5         $ 94.4         $ 103.9  
 
Large Case Pensions:
Revenue, excluding net realized capital gains $ 132.1 $ 121.1 $ 266.1 $ 262.8
Net realized capital gains         2.0           11.5           1.5           16.6  
Total revenue (GAAP measure)       $ 134.1         $ 132.6         $ 267.6         $ 279.4  
 
Operating earnings $ 6.2 $ 6.1 $ 12.0 $ 15.8
Net realized capital gains         1.3           7.5           1.0           12.8  
Net income (GAAP measure)       $ 7.5         $ 13.6         $ 13.0         $ 28.6  
 
 
 
Total Company:
Revenue, excluding net realized capital gains (A) $ 8,323.0 $ 8,502.4 $ 16,671.1 $ 17,047.2
Net realized capital gains         21.4           43.4           61.1           120.1  
Total revenue (GAAP measure) (B)       $ 8,344.4         $ 8,545.8         $ 16,732.2         $ 17,167.3  
 
Business segment operating expenses (C) $ 1,590.5 $ 1,534.7 $ 3,152.8 $ 3,078.6
Corporate Financing segment operating expenses (7)         1.2           43.4           2.4           86.7  
Operating expenses, including Corporate Financing segment (D) 1,591.7 1,578.1 3,155.2 3,165.3
Litigation-related insurance proceeds                   (20.0 )                   (90.0 )
Total operating expenses (GAAP measure) (E)       $ 1,591.7         $ 1,558.1         $ 3,155.2         $ 3,075.3  
 
 
Operating Expenses Ratios:
Business segment operating expense ratio (C)/(A) 19.1 % 18.1 % 18.9 % 18.1 %
Operating expense ratio (D)/(A) 19.1 % 18.6 % 18.9 % 18.6 %
Total operating expense ratio (E)/(B) (GAAP measure) 19.1 % 18.2 % 18.9 % 17.9 %
 
Membership
                         
 
June 30, March 31, December 31, June 30,
(Thousands)         2011       2011       2010       2010
Medical Membership:
Commercial 16,594 16,175 16,824 17,020
Medicare 405 407 445 451
Medicaid         1,242       1,212       1,199       1,131
Total Medical Membership         18,241       17,794       18,468       18,602
 
Consumer-Directed Health Plans (8)         2,405       2,412       2,184       2,221
 
Dental Membership:
Commercial 12,181 11,881 12,137 12,309
Medicare & Medicaid 635 626 639 605
Network Access (9)         970       982       971       998
Total Dental Membership         13,786       13,489       13,747       13,912
 
Pharmacy Benefit Management Membership:
Commercial 8,131 7,901 8,555 8,796
Medicare PDP (stand-alone) 432 447 608 637
Medicare Advantage PDP 188 190 227 234
Medicaid         27       27       27       30
Total Pharmacy Benefit Management Services         8,778       8,565       9,417       9,697
 
Operating Margins
                   
 
For the Three Months For the Six Months
Ended June 30, Ended June 30,
(Millions)         2011     2010     2011     2010
Reconciliation to Income Before Income Taxes:

Operating earnings before income taxes, excluding interest expense and amortization of other acquired intangible assets (A)

$ 886.8 $ 785.0 $ 1,837.9 $ 1,524.6
Interest expense (61.5 ) (60.7 ) (127.6 ) (121.6 )
Amortization of other acquired intangible assets (25.6 ) (24.2 ) (51.9 ) (48.6 )
Litigation-related insurance proceeds 20.0 90.0
Net realized capital gains           21.4           43.4           61.1           120.1  
Income before income taxes (GAAP measure)         $ 821.1         $ 763.5         $ 1,719.5         $ 1,564.5  
 
Reconciliation to Net Income:

Operating earnings, excluding interest expense and amortization of other acquired intangible assets, net of tax

$ 579.3 $ 505.3 $ 1,199.6 $ 991.4
Interest expense, net of tax (39.9 ) (39.4 ) (82.9 ) (79.0 )
Amortization of other acquired intangible assets, net of tax (16.6 ) (15.7 ) (33.7 ) (31.6 )
Litigation-related insurance proceeds, net of tax 13.0 58.5
Net realized capital gains, net of tax           13.9           27.8           39.7           114.3  
Net income (GAAP measure) (B)         $ 536.7         $ 491.0         $ 1,122.7         $ 1,053.6  
 
Reconciliation of Revenue:
Revenue, excluding net realized capital gains (C) $ 8,323.0 $ 8,502.4 $ 16,671.1 $ 17,047.2
Net realized capital gains           21.4           43.4           61.1           120.1  
Total revenue (GAAP measure) (D)         $ 8,344.4         $ 8,545.8         $ 16,732.2         $ 17,167.3  
 
Operating and Net Income Margins:
Pretax operating margin (A)/(C) 10.7 % 9.2 % 11.0 % 8.9 %
After-tax net income margin (B)/(D) (GAAP measure) 6.4 % 5.7 % 6.7 % 6.1 %
 

(1) Operating earnings and operating earnings per share exclude net realized capital gains and losses and other items, if any, from net income. Although the excluded items may recur, management believes that operating earnings and operating earnings per share provide a more useful comparison of Aetna’s underlying business performance from period to period. Management uses operating earnings to assess business performance and to make decisions regarding Aetna’s operations and allocation of resources among Aetna’s businesses. Operating earnings is also the measure reported to the Chief Executive Officer for these purposes.

The following items are excluded from operating earnings because we believe they neither relate to the ordinary course of our business nor reflect our underlying business performance:

  • Following a Pennsylvania Supreme Court ruling in June 2009, we recorded litigation-related insurance proceeds of $13.0 million ($20.0 million pretax) and $58.5 million ($90.0 million pretax) for the three and six months ended June 30, 2010, respectively, from our liability insurers related to certain litigation we settled in 2003.
  • 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 U.S. generally accepted accounting principles (“GAAP”), refer to the tables on pages 8 through 10 and 12 of this press release.

(2) Projected operating earnings per share exclude any future net realized capital gains and losses and other items, including any charge relating to our voluntary early retirement program, from net income. Aetna is not able to project the amount of future net realized capital gains and losses and therefore cannot reconcile projected operating earnings to projected net income in any period. Projected operating earnings per share for the full year 2011 reflect approximately 384 million weighted average diluted shares.

(3) 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 revenue excluding net realized capital gains and losses to revenue calculated under GAAP.

(4) The operating expense ratio reflects the inclusion of the Corporate Financing segment in operating expenses and excludes net realized capital gains and losses and other items, if any. For a reconciliation of this metric to the comparable GAAP measure refer to page 10 of this press release.

(5) 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, income taxes and amortization of other acquired intangible assets. Management also uses pretax operating margin to assess Aetna’s performance, including performance versus competitors.

(6) Revenue and operating expense information is presented before income taxes. Operating earnings is presented net of income taxes.

(7) Our Corporate Financing segment is not a business segment. It is added to our business segments to reconcile to our consolidated results. The Corporate Financing segment includes interest expense on our outstanding debt and the financing components of our pension and other postretirement benefit plan expenses.

(8) Represents members in consumer-directed health plans included in Aetna’s Commercial medical membership.

(9) Represents members in products that allow these members access to Aetna’s dental provider network for a nominal fee.

CAUTIONARY STATEMENT; ADDITIONAL INFORMATION — — Certain information in this press release is forward-looking, including our projections as to operating earnings per share, the impact of our Accountable Care Solutions model and weighted average diluted shares. Forward-looking 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, particularly the implementation of health care reform legislation and changes in Aetna’s future cash requirements, capital requirements, results of operations, financial condition and/or cash flows. Health care reform will significantly impact our business operations and financial results, including our medical benefit ratios. Components of the legislation will be phased in over the next seven years, and we will be required to dedicate material resources and incur material expenses during that time to implement health care reform. Many significant parts of the legislation, including health insurance exchanges and the implementation of medical loss ratios, require further guidance and clarification both at the federal level and in the form of regulations and actions by state legislatures to implement the law. 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 and less predictable economic conditions in the U.S. and abroad (including unanticipated levels of or rate of increase in the unemployment rate); adverse changes in health care reform and/or other federal or state government policies or regulations as a result of health care reform, changes in health care reform or otherwise (including legislative, judicial or regulatory measures that would affect our business model, restrict funding for various aspects of health care reform, limit our ability to price for the risk we assume and/or reflect reasonable costs or profits in our pricing, such as mandated minimum medical benefit ratios, eliminate or reduce ERISA pre-emption of state laws (increasing our potential litigation exposure) or mandate coverage of certain health benefits); our ability to differentiate our products and solutions from those offered by our competitors, and demonstrate that our products lead to access to better quality of care by our members; unanticipated increases in medical costs (including increased intensity or medical utilization as a result of the H1N1 or other flu, increased COBRA participation rates or otherwise; changes in membership mix to higher cost or lower-premium products or membership-adverse selection; 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; increases resulting from unfavorable changes in contracting or re-contracting with providers, and increased pharmacy costs); failure to achieve and/or delays in achieving desired rate increases and/or profitable membership growth due to regulatory restrictions, the difficult economy and/or significant competition, especially in key geographic areas where membership is concentrated; adverse changes in size, product mix or medical cost experience of membership; our ability to diversify our sources of revenue and earnings; adverse program, pricing or funding actions by federal or state government payors; the ability to successfully implement our agreement with CVS Caremark Corporation on a timely basis and in a cost-efficient manner and to achieve projected operating efficiencies for the agreement; our ability to integrate, simplify, and enhance our existing information technology systems and platforms to keep pace with changing customer and regulatory needs; the success of our health information technology initiatives; the ability to successfully integrate our businesses (including Medicity, Prodigy Health Group and other businesses we acquire) and implement multiple strategic and operational initiatives simultaneously; managing executive succession and key talent retention, recruitment and development; the ability to reduce administrative expenses while maintaining targeted levels of service and operating performance; the outcome of various litigation and regulatory matters, including the CMS risk adjustment audits of certain of our Medicare contracts, guaranty fund assessments and litigation concerning, and ongoing reviews by various regulatory authorities of, certain of our payment practices with respect to out-of-network providers; reputational issues arising from data security breaches or other means; the ability to improve relations with providers while taking actions to reduce medical costs and/or expand the services we offer; our ability to maintain our relationships with third party brokers, consultants and agents who sell our products; increases in medical costs or Group Insurance claims resulting from any epidemics, acts of terrorism or other extreme events; and a downgrade in our financial ratings. For more discussion of important risk factors that may materially affect Aetna, please see the risk factors contained in Aetna’s 2010 Annual Report on Form 10-K on file with the Securities and Exchange Commission (the “SEC”) and Aetna’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (Aetna’s “Second Quarter 10-Q”), when filed with the SEC. You also should read Aetna’s Second Quarter 10-Q when filed with the SEC for a discussion of Aetna’s historical results of operations and financial condition.

Language: English Contact:

Aetna
Media Contact:
Fred Laberge, 860-273-4788
labergear@aetna.com
or
Investor Contact:
Tom Cowhey, 860-273-2402
cowheyt@aetna.com

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