Health insurer Aetna Inc.’s AET first-quarter 2018 earnings of $3.19 per share beat the Zacks Consensus Estimate of $2.97 by 7.4%. Moreover, the bottom line improved 17.7% from the prior-year quarter.

Aetna Inc. Price, Consensus and EPS Surprise


Aetna Inc. Price, Consensus and EPS Surprise | Aetna Inc. Quote


The year-over-year improvement in earnings was attributable to strong performance across the company’s core businesses. Also, a favorable prior-year reserve development more than offset higher-than-expected flu-related medical costs.

Soft Revenues

Aetna recorded revenues of $15.22 billion, which declined 1.7% from the year-ago figure of $15.49 billion. This downside was primarily driven by the company’s divested domestic group life insurance, group disability insurance and absence management businesses during fourth-quarter 2017. However, the improvement was partially offset by higher adjusted revenues in the Health Care segment.

Total expense ratio of 17.9% increased 190 basis points year over year. Pre-tax margin of 10.1% expanded slightly by 10 basis points year over year.

The company’s total enrollment decreased to 47.9 million from 50.7 million in the year-ago quarter.

Segmental Performance Update

Starting from first-quarter 2018, Aetna realigned its business segments in order to be consistent with the changes brought in its management structure and internal management reporting. On the basis of this realignment, the company will now conduct its operations in the Health Care segment.

The company will provide the remaining portion of its financial results in the Corporate/Other category.

Health Care

Adjusted revenues were $15.1 billion, up 2% year over year. This upside was attributable to higher membership in the company’s Medicare products, a positive impact of the reinstatement of HIF (Health Insurer Fee) in 2018 along with taking on the new accounting guidance with regard to revenue recognition for the quarter under review. However, lower membership in Aetna’s ACA compliant individual and small group products as well as the company’s Medicaid products, partially offset this upside.

Pre-tax adjusted earnings of $1.5 million remained flat year over year on higher membership in Medicare products and previously announced exit from individual Commercial products. However, lower membership in Aetna’s Commercial and Medicaid products substantially offset the upside.

Total healthcare medical benefit ratio (MBR) fell 210 basis points year over year to 80.4% due to higher medical costs, attributable to a more severe flu season during the reported quarter compared with the prior-year period.

Financial Position

Total assets were $59.2 billion as of Mar 31, 2018, up 7.3% year over year.

Long-term debt decreased 4.6% year over year to $7.8 billion.

Debt-to-capitalization ratio was 35.8% as of Mar 31, 2018 compared with 37% as of Dec 31, 2017.

Zacks Rank

Aetna currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Health Maintenance Organizations

Among other players from the industry having reported first-quarter earnings so far, the bottom line of Anthem, Inc. ANTM, Centene Corporation CNC and UnitedHealth Group Incorporated UNH beat the respective Zacks Consensus Estimate.

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