As the new year rolled around, eyes turned to the public markets as publicly traded insurers prepared to release full year 2012 financial results. While no one anticipated the blockbuster performances of 2011 when medical costs stayed uncharacteristically low, the four companies detailed here – UnitedHealth, WellPoint, Aetna and Humana – all turned in solid years.
Common themes among the four largest insurers in the country included higher than anticipated flu costs which dampened fourth quarter earnings and low medical cost growth, generally below 6 percent. Meanwhile, the insurers continued to make significant investments either via acquisitions or internal investments as they look to expand their presence in the government-sponsored business, as well as building out their own healthcare networks.
UnitedHealth
UnitedHealth Group reported 2012 earnings of more than $5.5 billion on $110.6 billion in revenue, an 8 percent increase in earnings and 9 percent increase in gross revenue from 2011. Company executives pointed to a surge in enrollment and an increase in premiums as the primary drivers of the 2012 results, with the added benefit that medical costs did not rise as rapidly last year as UnitedHealth had forecast.
The cost trend increase was significantly lower than UnitedHealth had anticipated at the beginning of the year, when it forecast costs would grow at 6.0 percent in 2012. Market consensus at the time was that the cost trend would accelerate in 2012 as the economy improved and members sought treatments that they had put off during the economic downturn.
WellPoint
WellPoint's 2012 earnings beat analysts' estimates, also driven primarily by medical expenditures that were lower than the company expected. For the full year, 2012 net income totaled roughly $2.7 billion or an adjusted net income of $7.56 per share, 8 percent higher than 2011 earnings of $7.00 per share.
"Our fourth quarter results were stronger than originally expected, reflecting improved operating performance, solid expense management and improving execution in our core operations," said John Cannon, WellPoint's interim president and CEO, in a conference call announcing the 2012 results. WellPoint closed on its $4.9 billion acquisition of managed care company Amerigroup on Dec. 24, marking a major move in the government-sponsored business.
Aetna
Aetna reported fourth quarter 2012 earnings dropped 49 percent, as the nation's third largest insurer took one-time charges related to the settlement of a $120 million reimbursement lawsuit in December.
2012 full-year revenue was up 6 percent to $35.54 billion and full-year operating earnings totaled $1.77 billion, or $5.13 per share, only a slight downtick from 2011 when the company posted net earnings of $5.17 per share.
Aetna has also made a significant investment in the government-sponsored business via its planned acquisition of Coventry Health, a deal that is expected to close in mid-2013.
"These results bring to a close another solid year for the company, our customers and our shareholders. Looking back on 2012, Aetna continued to price with discipline and execute across our core business," said Mark T. Bertolini, Aetna chairman, CEO and president, in an earnings conference call.
Humana
Humana's earnings sank 3.5 percent in the fourth quarter 2012 from the previous year, as the insurer made investments to build its own integrated care network and reported more than $75 million in flu-related expenses. Despite the lower earnings, the company showed continued growth in a number of areas. For the full year 2012, Humana reported revenue increased 6 percent to $39.13 billion from $36.83 billion in 2011. 2012 earnings per share were $7.47, down from $8.46 for 2011, though 2012 earnings beat management's guidance, estimating 2012 would fall in the $7.25 to $7.35 range.
The company's $850 million acquisition of Metropolitan Health Network, a 50-physician network in Florida, and the purchase of the IT firm Certify Data Systems, shows Humana's continued investment in integrated care for Medicare Advantage, one of its core businesses.