Aetna Inc. (NYSE:AET) Q4 2014 Earnings Conference Call - Final Transcript

Feb 03, 2015 • 08:00 am ET


Aetna Inc. (NYSE:AET) Q4 2014 Earnings Conference Call - Final Transcript


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flow in 2014, which enabled us to continue to invest in our growth strategy, closed two acquisitions, pay down debt, increase our shareholder dividend and still repurchase $1.2 billion of our shares. Our strong finish to 2014 in combination with our strong start to 2015 gives us the confidence this morning to increase our 2015 operating EPS projection to at least $7 per share. As always, this projection does not include any projection of prior year development and represents approximately 13% growth over 2014 results, when prior year development is excluded.

In a moment, Shawn, will discuss our 2014 results and 2015 guidance in greater detail, but first, I would like to discuss Aetna's growth strategy and how we are executing on that strategy.

At our Investor Conference in December we highlighted the multiple avenues we have to drive top and bottomline growth. Specifically, we discussed a stability of our large group commercial businesses and the ability of these businesses to continue to produce attractive returns and generate capital. The growth of our Government franchise and the potential for sustained growth in the future, and the opportunity for additional growth in our individual business as exchanges continued to evolve.

Additionally, we discussed our continued efforts to health agenda transform the network model from one of episodic care to population health management and our strategy

Mark Bertolini

strategy to lead the industry toward a more consumer-oriented marketplace.I will now provide a brief update on how we are executing against some of these growth levers. Starting with our large group commercial business, 2014 was another solid year, as most of our large group commercial businesses met or exceeded our initial projections.In particular our fee-based businesses had an outstanding year.

We grew Commercial ASC membership by over 700,000 members for the year and exceeded our initial operating projection.These results demonstrate the ability of our large group commercial businesses to continue to generate solid returns and to provide capital to reinvest for the benefit of our customers and shareholders.Moving onto Government business, our Medicare franchise continues to be a key component of our strategy to grow our Government business and our 2014 results speak to our successes in this business.

During 2014, we grew our Medicare Advantage membership by almost 18% and our Medicare Supplement membership by nearly 20%, results were well in excess of our industry growth.Additionally, we just completed another highly successful Medicare annual enrollment period, where growth exceeded our initial projections. We now project to grow our Medicare Advantage membership by 90,000 members in the first quarter, including double-digit percentage growth in our individual Medicare Advantage membership.A key driver of Aetna's Medicare Advantage membership growth trajectory has been our star ratings.

For the second year in a row, approximately 80% of our sales have come through plans rated four stars or greater.Continuing with Government, our Medicaid business has had an excellent year in 2014. Underlying the strong performance, we grew medical membership by over 100,000 members in 2014, including over 11,000 members related