AET - Aetna to Announce Second-Quarter 2018 Results

July, 19 2018 05:00 PM Aetna Inc.

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 by Segment (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 to non-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 to Certain 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 adjusted earnings
Income before income taxes (GAAP measure)


$
1,193



$
1,700



$
1,283



$
585



$
4,761

Less: Income (loss) before income taxes attributable to non-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 by Segment (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 discontinued products


–



(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-controlling interests


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 to Certain 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 adjusted loss
(Loss) income before income taxes (GAAP measure)


$
(1,821
)


$
120



$
(9
)


$
(59
)


$
(1,769
)
Less: Income before income taxes attributable to non-controlling interests (GAAP measure)


1



–



–



–



1

(Loss) income before income taxes attributable to Aetna (GAAP measure)


(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 discontinued products


–



(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 discontinued products


–



(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 to non-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 to Certain 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 adjusted earnings
(Loss) income before income taxes (GAAP measure)


$
(628
)


$
1,820



$
1,274



$
526



$
2,992

Less: Income (loss) before income taxes attributable to non-controlling interests (GAAP measure)


3



(23
)


14



(4
)


(10
)
(Loss) income before income taxes attributable to Aetna (GAAP measure)


(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 discontinued products


–



(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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180719005011/en/

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

Company Name:	Aetna Inc.
Stock Symbol:	AET
Market:	NYSE

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