Aetna 2015 Annual Report Download - page 8

Annual Report- Page 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
OVERVIEW
We are one of the nation’s leading diversified health care benefits companies, serving an estimated 46.5 million
people with information and resources to help them, in consultation with their health care professionals, make better
informed decisions about their health care. We offer a broad range of traditional, voluntary and consumer-directed
health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life
and disability plans, medical management capabilities, Medicaid health care management services, Medicare
Advantage and Medicare supplement plans, workers’ compensation administrative services and health information
technology products and services, such as Accountable Care Solutions (“ACS”). Our customers include employer
groups, individuals, college students, part-time and hourly workers, health plans, health care providers
(“providers”), governmental units, government-sponsored plans, labor groups and expatriates. Our operations are
conducted in three business segments: Health Care, Group Insurance and Large Case Pensions.
The following MD&A provides a review of our financial condition at December 31, 2015 and December 31, 2014
and operating results for the years ended December 31, 2015, 2014 and 2013. We acquired Coventry Health Care,
Inc. (“Coventry”) on May 7, 2013 (the “Coventry Acquisition Date”). Coventry’s results are recorded within our
Health Care segment on and after the Coventry Acquisition Date for the year ended December 31, 2013 and for
each of the years in the two year period ended December 31, 2015. The Coventry acquisition significantly impacts
the comparability of our results for both 2015 and 2014 to 2013, as only approximately eight months of Coventry’s
results were included in 2013. This Overview should be read in conjunction with the entire MD&A, which contains
detailed information that is important to understanding our operating results and financial condition, the
consolidated financial statements and other data presented in this Annual Report. This Overview is qualified in its
entirety by the full MD&A.
Summarized Results
(Millions) 2015 2014 2013
Total revenue $ 60,336.5 $ 58,003.2 $ 47,294.6
Net income attributable to Aetna 2,390.2 2,040.8 1,913.6
Operating earnings (1) 2,717.1 2,404.6 2,241.1
Total medical membership (in thousands) 23,487 23,548 22,190
Cash flows from operations 3,866.1 3,372.8 2,278.7
(1) Our discussion of operating results for our reportable business segments is based on operating earnings, which is a non-GAAP measure
of net income attributable to Aetna (the term “GAAP” refers to U.S. generally accepted accounting principles). Non-GAAP financial
measures we disclose, such as operating earnings, should not be considered a substitute for, or superior to, financial measures
determined or calculated in accordance with GAAP. Refer to “Segment Results and Use of Non-GAAP Measures in this Document”
beginning on page 6 for a discussion of non-GAAP measures. Refer to Note 20 beginning on page 143 for a reconciliation of operating
earnings to net income attributable to Aetna.
We analyze our operating results based on operating earnings, which excludes from net income attributable to Aetna
net realized capital gains and losses, amortization of other acquired intangible assets as well as other items, if any,
that, neither relate to the ordinary course of our business nor reflect our underlying business performance.
Operating earnings for the past three years were primarily generated from our Health Care segment.
Operating earnings increased in 2015 compared to 2014, primarily as a result of higher underwriting margins
(calculated as premiums less health care costs) and higher fees and other revenue in our Health Care segment,
partially offset by an increase in general and administrative expenses. Operating earnings in 2014 were higher than
2013 primarily due to the full-year effect of the inclusion of results from the May 2013 acquisition of Coventry, as
well as higher underwriting margins in our Health Care segment and higher underwriting margins (calculated as
premiums less current and future benefits) in our Group Insurance segment, partially offset by an increase in
general and administrative expenses.