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

Good morning. And welcome to the Aetna Fourth Quarter and Full Year 2014 Earnings Conference Call. As a remainder, this conference is being recorded. For opening remarks and introductions, I'll now turn the conference over to Mr. Tom Cowhey, Vice President of Investor Relations. Mr. Cowhey, please go ahead.

Good morning. And thank you for joining Aetna's fourth quarter and full year 2014 earnings call and webcast. This is Tom Cowhey, Vice President of Investor Relations for Aetna and with me this morning are Aetna's Chairman and Chief Executive Officer, Mark Bertolini; and Chief Financial Officer, Shawn Guertin. Following the prepared portion of the remarks, we will answer your questions. Karen Rohan, Aetna's President will join Mark and Shawn for the Q&A session.

(Forward-Looking Cautionary Statement)

Finally, as you know, our ability to response to certain increase from investors and analyst in non-public forum is limited, so we invite you to ask all questions of a material nature on this call.

With that, I will turn the call over to Mark Bertolini. Mark?

Good morning. Thank you, Tom, and thank you all for joining us today. This morning, we've reported full year 2014 operating EPS of $6.70, representing a record results for the company, the high-end of our previous annual projection, year-over-year growth in excess of 7% and an operating EPS CAGR of 15% since 2010.

Looking back on 2014, we solved the price for nearly $1 billion of new fees and taxes, achieved pretax margins in excess of our initial 2014 projections, accelerated Coventry synergies, achieving a run rate in 2014 that will deliver at least $0.90 of operating EPS accretion in 2015, closing out our commitments to shareholders, enrolled nearly 600,000 public exchange members, while exceeding our initial profitability projections in this new program, bolstered our consumer platform through the acquisition of bSwift and continued to advance our efforts to shift the network model for patient-centric population health management.Our 2014 results

are a testament to the strength of our leadership team and the execution of our growth strategy. Underlying these full year results, we ended the year with more than 23.5 million medical members, well in excess of our previous projections and representing full year growth of approximately 1.4 million members.

We reported record operating revenue of nearly $58 billion, including organic growth of approximately 13% across multiple lines of business. We reported a full year Commercial Medical Benefit Ratio that absent our conservative stance on our ACA compliant block of business and higher than projected flu would have been at the low-end of our previous 2014 projections.

Our full year Commercial Medical Benefit Ratio of 80.2% was a very good result, as aggregate commercial medical cost trend increases remain moderate and our 51 to 300 employee block performed consistent with our previous projection. Our operating expense ratio, excluding the impact of Healthcare Reform fees and taxes improved by 100 basis points, as we grew operating revenue and continued to focus on synergy realization.

Finally, we generated strong cash