Aetna 2nd Qtr 2008 Earnings Beats The Street

Aetna Reports Second-Quarter 2008 Results

>Operating earnings were $0.94 per share, a 13 percent increase over the prior-year quarter, above the Thomson/First Call mean of $0.93 per share
>Net income was $0.97 per share, a 14 percent increase over the prior-year quarter
>Medical membership increased by 32,000 to 17.5 million in the second quarter of 2008
>Commercial Medical Benefit Ratio was 80.5 percent
>Guidance: Full-year 2008 operating earnings per share projected to be $4.00

HARTFORD, Conn., July 31, 2008 — Aetna (NYSE: AET) today announced second-quarter 2008 operating earnings of $0.94 per share, a 13 percent increase over the prior-year quarter. The increase in operating earnings per share reflects 15 percent growth in total revenue, solid underwriting results and the impact of share repurchases. The growth in total revenue was primarily from quarter-over-quarter membership growth and premium rate increases. Second-quarter net income was $0.97 per share, an increase of 14 percent over the prior-year quarter. Operating earnings exclude net realized capital losses and other items.

Total company results

Total Revenues increased 15 percent to $7.8 billion for the second quarter of 2008, compared with $6.8 billion for the second quarter of 2007. The growth in second-quarter revenue reflects a 17 percent increase in premiums and a 13 percent increase in fees and other revenue. This revenue growth reflects a higher level of membership, premium rate increases and revenue from the third quarter 2007 acquisition of Schaller Anderson, Incorporated.

Total Operating Expenses were $1.4 billion for the second quarter of 2008, $183.6 million higher than the second quarter of 2007. Operating expenses as a percentage of revenue3 was 17.8 percent for the second quarter of 2008 and 2007. Excluding operating expenses from our recent acquisitions of Schaller Anderson and Goodhealth Worldwide, the operating expense ratio was 17.3 percent for the second quarter of 2008, an improvement of 50 basis points. Including net realized capital losses, this percentage was 17.9 percent for the second quarter of 2008 and 2007.

Corporate Interest Expense was $36.8 million after tax for the second quarter of 2008, compared with $27.8 million for the second quarter of 2007. The increase for second quarter 2008 was due to higher average debt levels in 2008.

Net Income was $480.5 million for the second quarter of 2008, compared with $451.3 million for the second quarter of 2007. Net income includes $14.3 million and $30.3 million of net realized capital losses in the second quarter of 2008 and 2007, respectively.

Operating Margin was 10.2 percent for the second quarter of 2008, compared with 10.8 percent for the second quarter of 2007, pre-tax.4 The after-tax operating margin, which represents net income divided by total revenue, was 6.1 percent for the second quarter of 2008, compared with 6.6 percent for the second quarter of 2007.

Share repurchases totaled 13.7 million shares at a cost of $600.0 million in the second quarter of 2008.