Aetna to Announce Second-Quarter 2018 Results

Thursday, July 19, 2018

HARTFORD, Conn.–(BUSINESS WIRE)–Aetna (NYSE: AET) today announced that second-quarter 2018 results will be made public on Thursday, August 2, at 6:30 a.m. ET. Given the pending transaction with CVS Health, Aetna will not host a conference call in conjunction with its earnings release.

About Aetna

Aetna is one of the nation’s leading diversified health care benefits companies, serving an estimated 40.3 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 and behavioral health 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

 
Statements of Income Before Income Taxes Attributable to Aetna bySegment (Unaudited)
       
      Health Care
(Millions)     Q1 2017     Q2 2017     Q3 2017     Q4 2017     Full Year 2017
Revenue:                              
Premiums     $ 13,240       $ 13,242       $ 12,730       $ 12,890       $ 52,102  
Fees and other revenue     1,448       1,458       1,416       1,428       5,750  
Net investment income     117       114       113       138       482  
Net realized capital gains     1       7       26       21       55  
Total revenue     14,806       14,821       14,285       14,477       58,389  
Benefits and expenses:                              
Benefit costs     10,928       10,591       10,423       10,862       42,804  
Operating expenses     2,625       2,472       2,521       2,934       10,552  
Amortization of other acquired intangible assets     60       58       58       96       272  
Total benefits and expenses     13,613       13,121       13,002       13,892       53,628  
Income before income taxes including non-controlling interests     1,193       1,700       1,283       585       4,761  
Less: Income (loss) before income taxes attributable tonon-controlling interests     2       (23 )     14       (4 )     (11 )
Income before income taxes attributable to Aetna     $ 1,191       $ 1,723       $ 1,269       $ 589       $ 4,772  
                                                   
   
Reconciliation of the Most Directly Comparable GAAP Measure toCertain Reported Amounts
   
(Millions)     Health Care
Reconciliation of total revenue to adjusted revenue     Q1 2017     Q2 2017     Q3 2017     Q4 2017     Full Year 2017
Total revenue (GAAP measure)     $ 14,806       $ 14,821       $ 14,285       $ 14,477       $ 58,389  
Net realized capital gains     (1 )     (7 )     (26 )     (21 )     (55 )
Adjusted revenue(2) (excludes net realized capital gains)     $ 14,805       $ 14,814       $ 14,259       $ 14,456       $ 58,334  
                               
Reconciliation of income before income taxes to pre-tax adjustedearnings
Income before income taxes (GAAP measure)     $ 1,193       $ 1,700       $ 1,283       $ 585       $ 4,761  
Less: Income (loss) before income taxes attributable tonon-controlling interests (GAAP measure)     2       (23 )     14       (4 )     (11 )
Income before income taxes attributable to Aetna (GAAP measure)     1,191       1,723       1,269       589       4,772  
Penn Treaty-related guaranty fund assessments     231                         231  
Amortization of other acquired intangible assets     60       58       58       96       272  
Net realized capital gains     (1 )     (7 )     (26 )     (21 )     (55 )
Pre-tax adjusted earnings(1)     $ 1,481       $ 1,774       $ 1,301       $ 664       $ 5,220  
                                                   
 
Statements of Income Before Income Taxes Attributable to Aetna bySegment (Unaudited)
       
      Corporate/Other (3)
(Millions)     Q1 2017     Q2 2017     Q3 2017     Q4 2017     Full Year 2017
Revenue:                              
Premiums     $ 523       $ 533       $ 542       $ 194       $ 1,792  
Fees and other revenue     27       28       27       98       180  
Net investment income     143       123       120       82       468  
Net realized capital (losses) gains     (334 )     18       20       2       (294 )
Total revenue     359       702       709       376       2,146  
Benefits and expenses:                              
Benefit costs     533       525       537       229       1,824  
Operating expenses     1,228       80       91       113       1,512  
Interest expense     173       86       90       93       442  
Loss on early extinguishment of long-term debt     246                         246  
Reduction of reserve for anticipated future losses on discontinuedproducts           (109 )                 (109 )
Total benefits and expenses     2,180       582       718       435       3,915  
(Loss) income before income taxes including non-controlling interests     (1,821 )     120       (9 )     (59 )     (1,769 )
Less: Income before income taxes attributable to non-controllinginterests     1                         1  
(Loss) income before income taxes attributable to Aetna     $ (1,822 )     $ 120       $ (9 )     $ (59 )     $ (1,770 )
                                                   
   
Reconciliation of the Most Directly Comparable GAAP Measure toCertain Reported Amounts
   
(Millions)     Corporate/Other (3)
Reconciliation of total revenue to adjusted revenue     Q1 2017     Q2 2017     Q3 2017     Q4 2017     Full Year 2017
Total revenue (GAAP measure)     $ 359       $ 702       $ 709       $ 376       $ 2,146  
Gain related to sale of certain domestic group insurance businesses                       (88 )     (88 )
Interest income on proceeds of transaction-related debt     (11 )                       (11 )
Net realized capital losses (gains)     334       (18 )     (20 )     (2 )     294  
Adjusted revenue(2) (excludes net realized capital losses(gains) and other items)     $ 682       $ 684       $ 689       $ 286       $ 2,341  
                               
Reconciliation of income before income taxes to pre-tax adjustedloss
(Loss) income before income taxes (GAAP measure)     $ (1,821 )     $ 120       $ (9 )     $ (59 )     $ (1,769 )
Less: Income before income taxes attributable to non-controllinginterests (GAAP measure)     1                         1  
(Loss) income before income taxes attributable to Aetna (GAAPmeasure)     (1,822 )     120       (9 )     (59 )     (1,770 )
Gain related to sale of certain domestic group insurance businesses                       (88 )     (88 )
Loss on early extinguishment of long-term debt     246                       246  
Transaction and integration-related costs     1,212       (10 )           38       1,240  
Restructuring costs                       60       60  
Reduction of reserve for anticipated future losses on discontinuedproducts           (109 )                 (109 )
Net realized capital losses (gains)     334       (18 )     (20 )     (2 )     294  
Pre-tax adjusted loss(1)     $ (30 )     $ (17 )     $ (29 )     $ (51 )     $ (127 )
                                                   
 
Statements of Income Before Income Taxes Attributable to Aetna(Unaudited)
       
      Total Company
(Millions)     Q1 2017     Q2 2017     Q3 2017     Q4 2017     Full Year 2017
Revenue:                              
Premiums     $ 13,763       $ 13,775       $ 13,272       $ 13,084       $ 53,894  
Fees and other revenue     1,475       1,486       1,443       1,526       5,930  
Net investment income     260       237       233       220       950  
Net realized capital (losses) gains     (333 )     25       46       23       (239 )
Total revenue     15,165       15,523       14,994       14,853       60,535  
Benefits and expenses:                              
Benefit costs     11,461       11,116       10,960       11,091       44,628  
Operating expenses     3,853       2,552       2,612       3,047       12,064  
Interest expense     173       86       90       93       442  
Loss on early extinguishment of long-term debt     246                         246  
Amortization of other acquired intangible assets     60       58       58       96       272  
Reduction of reserve for anticipated future losses on discontinuedproducts           (109 )                 (109 )
Total benefits and expenses     15,793       13,703       13,720       14,327       57,543  
(Loss) income before income taxes including non-controlling interests     (628 )     1,820       1,274       526       2,992  
Less: Income (loss) before income taxes attributable tonon-controlling interests     3       (23 )     14       (4 )     (10 )
(Loss) income before income taxes attributable to Aetna     $ (631 )     $ 1,843       $ 1,260       $ 530       $ 3,002  
                                                   
   
Reconciliation of the Most Directly Comparable GAAP Measure toCertain Reported Amounts
   
(Millions)     Total Company
Reconciliation of total revenue to adjusted revenue     Q1 2017     Q2 2017     Q3 2017     Q4 2017     Full Year 2017
Total revenue (GAAP measure)     $ 15,165       $ 15,523       $ 14,994       $ 14,853       $ 60,535  
Gain related to sale of certain domestic group insurance businesses                       (88 )     (88 )
Interest income on proceeds of transaction-related debt     (11 )                       (11 )
Net realized capital losses (gains)     333       (25 )     (46 )     (23 )     239  
Adjusted revenue(2) (excludes net realized capital losses(gains) and other items)     $ 15,487       $ 15,498       $ 14,948       $ 14,742       $ 60,675  
                               
Reconciliation of income before income taxes to pre-tax adjustedearnings
(Loss) income before income taxes (GAAP measure)     $ (628 )     $ 1,820       $ 1,274       $ 526       $ 2,992  
Less: Income (loss) before income taxes attributable tonon-controlling interests (GAAP measure)     3       (23 )     14       (4 )     (10 )
(Loss) income before income taxes attributable to Aetna (GAAPmeasure)     (631 )     1,843       1,260       530       3,002  
Gain related to sale of certain domestic group insurance businesses                       (88 )     (88 )
Loss on early extinguishment of long-term debt     246                         246  
Penn Treaty-related guaranty fund assessments     231                         231  
Transaction and integration-related costs     1,212       (10 )           38       1,240  
Restructuring costs                       60       60  
Reduction of reserve for anticipated future losses on discontinuedproducts           (109 )                 (109 )
Amortization of other acquired intangible assets     60       58       58       96       272  
Net realized capital losses (gains)     333       (25 )     (46 )     (23 )     239  
Pre-tax adjusted earnings(1)     $ 1,451       $ 1,757       $ 1,272       $ 613       $ 5,093  
                                                   
 
Health Care Medical Benefit Ratios      
       
(Millions)     Q1 2017     Q2 2017     Q3 2017     Q4 2017     Full Year 2017
Premiums (GAAP measure)                              
Commercial     $ 6,129       $ 6,287       $ 6,063       $ 6,149       $ 24,628  
Government     7,111       6,955       6,667       6,741       27,474  
Health Care     $ 13,240       $ 13,242       $ 12,730       $ 12,890       $ 52,102  
Health Care Costs (GAAP measure)                              
Commercial     $ 4,860       $ 4,938       $ 4,928       $ 5,277       $ 20,003  
Government     6,068       5,653       5,495       5,585       22,801  
Health Care     $ 10,928       $ 10,591       $ 10,423       $ 10,862       $ 42,804  
Medical Benefit Ratios “MBRs”                              
Commercial     79.3 %     78.5 %     81.3 %     85.8 %     81.2 %
Government     85.3 %     81.3 %     82.4 %     82.9 %     83.0 %
Health Care     82.5 %     80.0 %     81.9 %     84.3 %     82.2 %
                                         

Footnotes

(1) Non-GAAP financial measures such as pre-tax adjusted earnings (loss) and adjusted revenue exclude from the relevant GAAP metrics, 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 non-GAAP financial measures Aetna discloses, including those described above, provide a more useful comparison of Aetna’s underlying business performance from period to period. The chief executive officer assesses consolidated Aetna results based on adjusted earnings and assesses business segment results based on pre-tax adjusted earnings because income taxes are recorded in Aetna's Corporate/Other segment and are not allocated to Aetna's business operations. The non-GAAP financial measures Aetna discloses, including those described above, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.

For the periods covered in this press release, the following items are excluded from the non-GAAP financial measures described above, as applicable, because Aetna believes they neither relate to the ordinary course of Aetna’s business nor reflect Aetna’s underlying business performance:

  • During the three months ended December 31, 2017, Aetna sold its domestic group life insurance, group disability insurance and absence management businesses (the “Group Insurance sale”). The transaction was accomplished through an indemnity reinsurance arrangement. A significant portion of the gain has been deferred and will be amortized into earnings: (a) over the remaining contract period (estimated to be approximately 3 years) in proportion to the amount of insurance protection provided for the prospective reinsurance portion of the gain and (b) as Aetna recovers amounts due from the buyer over a period estimated to be approximately 30 years for the retrospective reinsurance portion of the gain. The gain recognized 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.
  • During the three months ended March 31, 2017, Aetna incurred losses on the early extinguishment of long-term debt due to (a) the mandatory redemption of $10.2 billion aggregate principal amount of certain of its senior notes issued in June 2016 (collectively, the “SMR Notes”) following the termination of the definitive agreement (the “Humana Merger Agreement”) to acquire Humana Inc. (“Humana”) and (b) the early redemption of $750 million aggregate principal amount of its outstanding senior notes due 2020.
  • During the three months ended March 31, 2017, Aetna recorded an expense for estimated future guaranty fund assessments related to Penn Treaty Network America Insurance Company and one of its subsidiaries (collectively, “Penn Treaty”), which was placed in rehabilitation in 2009 and placed in liquidation in March 2017. This expense 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.
  • Aetna recorded transaction and integration-related costs during the year ended December 31, 2017 primarily related to its proposed acquisition by CVS Health and its proposed acquisition of Humana (the “Humana Transaction”). Transaction costs include costs associated with the transactions contemplated by the merger agreement under which CVS Health Corporation has agreed to acquire all of Aetna’s outstanding stock, the termination of the Humana Merger Agreement, the termination of Aetna’s agreement to sell certain assets to Molina Healthcare, Inc. and advisory, legal and other professional fees which are reflected in Aetna’s GAAP Consolidated Statements of Income in general and administrative expenses. Transaction costs also include the negative cost of carry associated with the debt financing that Aetna obtained in June 2016 for the Humana Transaction. Prior to the mandatory redemption of the SMR Notes, the negative cost of carry associated with these senior notes was excluded from pre-tax adjusted earnings. The negative cost of carry associated with the $2.8 billion aggregate principal amount of Aetna’s senior notes issued in June 2016 that are not subject to mandatory redemption (the “Other 2016 Senior Notes”) was excluded from pre-tax adjusted earnings through the date of the termination of the Humana Merger Agreement. The components of the negative cost of carry are reflected in Aetna’s GAAP Consolidated Statements of Income in interest expense and net investment income. Subsequent to the termination of the Humana Merger Agreement, the interest expense and net investment income associated with the Other 2016 Senior Notes were no longer excluded from pre-tax adjusted earnings.
  • Restructuring costs for the three months ended December 31, 2017 include severance costs associated with Aetna’s expense management and cost control initiatives. The restructuring costs are reflected in Aetna’s GAAP Consolidated Statements of Income in general and administrative expenses.
  • In 1993, Aetna discontinued the sale of fully guaranteed large case pensions products and established a reserve for anticipated future losses on these products, which Aetna reviews quarterly. During the three months ended June 30, 2017, Aetna reduced the reserve for anticipated future losses on discontinued products. Aetna believes excluding any changes in the reserve for anticipated future losses on discontinued products from pre-tax adjusted earnings provides more useful information as to Aetna’s continuing products and is consistent with the treatment of the operating results of these discontinued products, which are credited or charged to the reserve and do not affect Aetna’s operating results.
  • 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 financial measures calculated under GAAP to these items, refer to the tables on pages 3 through 5 of this press release.

(2) Adjusted revenue excludes net realized capital gains and losses, gain related to the Group Insurance sale and interest income on the proceeds of Aetna’s senior notes issued in June 2016 as noted in (1) above. Refer to the tables on pages 3 through 5 of this press release for a reconciliation of total revenue calculated under GAAP to adjusted revenue.

(3) Aetna’s Corporate/Other category is not a business segment. It is added to Aetna’s business segment to reconcile segment reporting to Aetna’s consolidated results. The Corporate/Other category includes:

  • Products for which Aetna no longer solicits or accepts new customers such as its large case pensions and long-term care products;
  • Contracts Aetna has divested through reinsurance or other contracts, such as its domestic group life insurance, group disability insurance and absence management businesses; and
  • Corporate expenses not supporting Aetna's business operations, including transaction and integration-related costs, income taxes, interest expense on its outstanding debt and the financing components of its pension and other postretirement employee benefit plans expense.

As described in (1) above, the pre-tax adjusted earnings of the Corporate/Other category exclude other items, if any, that neither relate to the ordinary course of Aetna’s business nor reflect Aetna’s underlying business performance.

Language:

English

Contact:

Aetna
Media Contact:
T.J. Crawford, 212-457-0583
crawfordt2@aetna.com
or
Investor Contact:
Joe Krocheski, 860-273-0896
krocheskij@aetna.com

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Ticker:

AET

Exchange:

NYSE

@AetnaNews

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