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Running head: AETNA FINANCE


LTP Comprehensive Financial Analysis Paper
Mary Jordan, John Kraft, Cynthia Faust, Rebecca Nicholson
LDR 640 Financial Systems Management
Prof. Lihua Dishman
May 26, 2014


Aetna is an insurance company that has been in operation since 1912. It has an obviously long
outstanding reputation. Financial analyses are done to provide financial data so that a company
can strategically plan the future movement of the organization. The financial data that is
included within this analysis are the balance sheet, income statement and several ratios. All of
this will more than provide a briefing as to why Aetna Insurance Company has remained so
strong in the insurance industry. The information that has been gathered and compiled covers
the years of 2012 and 2013 which will provide the current up to date status of this insurance
Keywords: Aetna, financial data, business analysis, finance ratio


Aetna Financial
Introduction M. Jordan
With any successful business, you will find a strong team in the financial management
area. Thus, they provide financial information that adheres to the mission and vision statement
of the organization. This financial advisory board provides all the economics that are within the
organization. This can include the financial moment of current day, the future and what has even
happened in the past. Financial advisors provide financial data in the forms of many different
types of statements. Such statements would include the Income Statement of the company,
Balance Statement and Cash Flow Statement. Each of these statements provides the organization
with important information of the finances of the organizations.
According to Hawawini & Viallet (2011), the Income Statement determines the amount
of net profit or loss of the organization, the Balance Statement provides what assets and
liabilities the organization has and the Cash Flow Statement will show the total net cash flow as
the difference between the total amount of dollars received and total amount of dollars paid out
over a period of time.
Aetna is an insurance company that has a traceable history to the year 1912. According
the Aetna website, Aetna wrote the nations first comprehensive coverage. What this means, is
that it combined several different coverages all in one contract. From this first comprehensive
offering, Aetna started to become a familiar name in households across the Nation.
Soon after, Aetna built their own rehabilitation clinics and started implementing help for
those who were disabled. The momentum just kept going as the company grew and expanded
into many other different fields. As an example of their momentum, Aetna established group

paid up coverage, wrote the first individual life insurance policy which were for the seven
Mercury astronauts (AETNA). Bringing Aetna forward, listed are some up to date statics about
Aetna (
22.719 million medical members
14.565 million dental members
14.183 million pharmacy members
Health care networks:
More than 1 million health care professionals
More than 616,000 primary care doctors and specialists
More than 5,400 hospitals
A network of specialist physicians, recognized with Aexcel designation, based on
clinical performance and cost efficiency

Products and programs:
Aetna offers a broad range of insurance and employee benefits products.
The first national, full-service health insurer to offer a consumer-directed health plan,
Aetna continues to lead the way with its Aetna HealthFund
line of products, including
HSA, HRA and RRA options.
Aetna offers a wide array of programs and services that help control rising employee
benefits costs while striving to improve the quality of health care, such as case
management; disease management and patient safety programs; integrated medical,
dental, pharmaceutical, behavioral health and disability information.
Aetna provides members with access to convenient tools and easy-to-understand
information that can help them make better-informed decisions about their health and
financial wellbeing.
National presence:
Aetna provides benefits through employers in all 50 states, with products and services
targeted specifically to small, mid-sized and large multi-site national employers.
Aetna also serves individuals and Medicare and Medicaid beneficiaries in certain
Aetna companies:
ActiveHealth Management
Aetna Capital Management
Aetna International

Aetna Student Health
Coventry Health Care
Meritain Health
Prodigy Health Group
Schaller Anderson
Strategic Resource Company
Financial Statement Analysis M. Jordan
The Financial Advisory team needs to have a full understanding of organizations
financial status. Financial statements are formal documents issued by firms to provide financial
information about their business (Hawawini & Viallet, 2011). A ratio analysis is one useful
method often used to provide the needed data (Gapenski, 2009). Liquidity, solvency and debt
management, asset management and utilization, profitability and indications of market value are
the five main financial ratios used to provide the information needed to meet financial
obligations (Hawawini & Viallet, 2011).
The five main financial ratios are used to help analyze the financial strengths and
weakness of Aetna. The liquidity ratio is used to show if a company is able to pay off their
short term debts (Investopedia, n.d). With this ratio, the higher the value of the ratio, the larger
the margin of safety that the company possesses to cover short term debt, according to
Investopedia, ( n.d.). The quick ratio, which divides cash plus accounts receivable by the current
liabilities, and current ratio, which is calculated by dividing current assets by current liabilities
are used to provide information on the companys assets (Hawawini & Viallet, 2011).


The Financial Advisory team also watches the debt that a company may have. Solvency
ratios help provide the team the data needed to make sure the company has the ability to meet its
debt and other obligations (Investopedia, n.d). This ratio is generally calculated by the net
income plus depreciation divided by short term liabilities (Investopedia, n.d.) plus long term
liabilities. Solvency ratios consist of debt ratio, which compares a companys total debt to its
total assets (Investopedia, n.d). This ratio is calculated by total liabilities divided by total assets.
Debt to equity ratio which also helps measures the degree to which the assets of the company are
financed by debt and the shareholders equity of the company (Accounting n.d). Lastly, there is
the times interest earned ratio which is calculated by earnings before interest and tax divided by
interest expenses which will provide how many times the firms pre-tax operating profit will or
will not cover interest expenses (Hawawini & Viallet, 2011).
Asset management ratios give the company indications as to how well they are
managing their assets to general sales. Within the asset management ratios advisors will use the
inventory turnover ratio which helps focus on the management of inventories and the total assets
turnover ratio that helps which measures the efficiency of a companys use of its asset to product
sales (ReadyRatios, n.d.).
Profitability ratios help the Financial Advisory team in assessing a businesss ability to
generate earnings as compared to its expenses and other relevant costs incurred during a specific
period of time (Investopedia, n.d.).
Lastly, earnings per share and the price/earnings ratio make up what is known as the
market value ratios. Market value ratios paint a picture as to the way other investors see how a
company is doing. Earnings per share ratio is a ratio that show the profitability of the company
and is computed by net income minus dividends on preferred stock divided by average

outstanding shares.(Investopedia, n.d). The other helpful ratio is the price/earnings which
according to Investopedia, is valuation ratio of a companys current share price compare to its
per-share earnings. This is calculated by the market value per share divided by earnings per
Aetna Statements for years 2013 and 2012 ( M. Jordan
Aetna Inc.
Annual Income Statement
Period Ended 12/31/2013 12/31/2012
Update Reclassified
3/21/2014 3/20/2014
In millions of USD
(except for per share items)
Net Premiums Earned 41,836.60 31,715.40
Other Insurance Revenue 4,550.50 3,853.50
Total Premiums Earned 46,387.10 35,568.90
Net Investment Income 916.3 922.2
Realized Gains (Losses) -8.8 108.7
Total Revenue 47,294.60 36,599.80
Losses, Benefits, and Adjustments 35,246.40 26,680.40
Losses, Benefits, and
Adjustments, Total
35,246.40 26,680.40
Selling / General / Administrative
8,645.40 6,876.40
Labor & Related Expense -- --
Selling / General / Administrative
Expenses, Total
8,645.40 6,876.40
Amortization of Intangibles 214.6 142
Depreciation / Amortization 214.6 142
Litigation -- --
Other Unusual Expense (Income) 0 84.9
Unusual Expense (Income) 0 84.9
Total Operating Expense 44,106.40 33,783.70
Operating Income 3,188.20 2,816.10
Interest Expense - Non-Operating -333.7 -268.8
Interest Expense, Net Non-
-333.7 -268.8
Interest Income (Expense), Net-
Non-Operating, Total
-333.7 -268.8
Gain (Loss) on Sale of Assets 86 0
Net Income Before Taxes 2,940.50 2,547.30
Provision for Income Taxes 1,028.60 887.5
Net Income After Taxes 1,911.90 1,659.80
Minority Interest 1.7 -1.9


Annual Balance Sheet
Period Ended 12/31/2013 12/31/2012 12/31/2011 12/31/2010
Update Update Update Update
4/21/2014 4/21/2014 4/21/2014 4/21/2014
In millions of USD
(except for per share items)
Cash & Equivalents 1,412.30 2,579.20 679.7 1,867.60
Receivables - Other -- 947.9 863.4 902.7
Total Receivables,
-- 947.9 863.4 902.7
Property / Plant /
Equipment, Total -
721.9 540 556.9 529.3
Goodwill, Net 10,227.50 6,214.40 6,203.90 5,146.40
Intangibles - Gross 3,090.00 1,720.40 1,772.40 1,209.30
-995.9 -901.7 -813.8 -713.8
Intangibles, Net 2,094.10 818.7 958.6 495.5
LT Investments -
23,791.40 21,967.20 20,295.00 19,926.60
Long Term
23,791.40 21,967.20 20,295.00 19,926.60
1,331.20 804.7 761.4 661.9
Note Receivable -
Long Term
1,850.00 -- -- --
Deferred Income
Tax - Long Term
521.5 426.5 387.2 356.9
Other Long Term
Assets, Total
521.5 426.5 387.2 356.9
Accrued Investment
211.1 194.3 195.8 203.4
Reinsurance - Asset 759.8 876.8 921.7 960.1
Separate Accounts -
3,972.50 4,247.10 5,218.20 5,295.30
Other Assets 2,978.50 1,877.70 1,551.30 1,393.70
Other Assets, Total 7,921.90 7,195.90 7,887.00 7,852.50
Total Assets 49,871.80 41,494.50 38,593.10 37,739.40
Accrued Expenses 3,226.90 2,407.00 2,520.30 2,436.80
Policy Liabilities 13,528.90 12,013.80 10,855.30 11,014.90
Insurance Reserves 734.4 739.9 668 728.4
Unearned Premium
/ Unearned
458.7 403.5 369.7 318.7
Separate Accounts -
3,972.50 4,247.10 5,218.20 5,295.30
2,915.30 2,640.90 2,633.20 2,234.70
Policy Liabilities 21,609.80 20,045.20 19,744.40 19,592.00
Notes Payable / 0 0 425.9 0

Short Term Debt
Current Portion of
Long Term Debt /
Capital Leases
387.3 -- 0 899.9
Other Payables 792.6 47.1 0 210.8
Other Current
liabilities, Total
792.6 47.1 0 210.8
Long Term Debt 7,865.30 6,481.30 3,977.70 3,482.60
Total Long Term
7,865.30 6,481.30 3,977.70 3,482.60

12/31/2013 12/31/2012
Total Operating Expenses 44,106.40 33,783.70
Total Revenue 47,294.60 36,599.80
Total Assets 49,871.80 41,494.50
Total Liabilities 35,846.30 31,088.70
Total Equity 14,025.50 10,405.80
Net Income 1,913.60 1,657.90
Liquidity, Solvency, Asset Management, Profitability, and Market Value comprise the
five categories of financial ratios. The liquidity ratios show how well a company can repay its
short-term liabilities with the cash raised from the sale of its short-term assets (Hawawini &
Viallet, 2011, p.85). Solvency ratios are also called debt management ratios and these determine
whether or not a company is likely to go bankrupt by looking at their debt versus their assets
(Kennon, 2014). Asset management ratios look at a companys inventories and place a value on
their management (Hawawini & Viallet, 2011). Profitability ratios measure the return earned
on a companys capital and the financial cushion relative to each dollar of sales (Kennon,
2014). Market value ratios show the financial worth of a company relative to other companies.


Financial Ratios Calculations and Results for 2013

Current Ratio =Current assets/Current liabilities
49,871.80 / 35,846.30 = 1.39
Operating Cash Flow
=Cash flow from operations/Current liabilities
2,278.70 / 35,846.30 = 0.06
Net Working Capital =Current assets-Current liabilities
49,871.80 - 35,846.30 = 14,025.50
Debt Ratio =Total debt/Total assets
8,252.60 / 49,871.80 = 0.17
Debt to Equity Ratio = Total debt/Total equity
8,252.60 / 14,025.50 = 0.59
=EBIT/Interest charges
3,188.20 / 333.70 = 9.55
Asset Management
Total Assets Turnover
=Sales/Total assets
41,836.60 / 49,871.80 = 0.84
Asset Turnover Ratio =Revenue/Average Total Assets
47,294.60 / 49,871.80 = 0.95
Return on Sales Ratio =EAT/Sales
1,911.90 / 41,836.60 = 0.05
Return on Total Assets
=EAT/Total assets
1,911.90 / 49,871.80 = 0.04
Return on Total Equity
=EAT/Total Equity
1,911.90 / 14,025.50 = 0.14
Market Value
Earnings Per Share Ratio =EAT/Number of shares of common stock outstanding
1,911.90 / 362.20 = 5.28

Price/Earnings Ratio =Price per share/Earnings per share
68.59 / 5.28 = 12.99

Financial Analysis of Aetna for 2013
Liquidity: The current ratio shows if Aetna will be able to pay their short-term
liabilities. This calculation looks at paying with cash that is earned from their short-term assets
(Hawawini & Viallet, 2011). The current ratio should at least be one and it should be closer to
two. Aetna is at 1.39 and is an acceptable level because it is above one. They would be in a

better financial position if they could increase their assets and / or decrease their liabilities
somewhat. The net working capital calculation produces the net liquidity of the company
(Swayne, Duncan, & Ginter, 2011). Another way to view this is if all of the companys current
liabilities are paid off, this is the amount of working capital that is available to Aetna to utilize.
The operating cash flow ratio is another way to gauge the company's short-term liquidity. The
higher this percentage is, the more liquid a company is; meaning the company can more easily
access cash in order to pay debt.
Solvency: The debt ratio describes a companys dependence upon debt to finance their
assets (ReadyRatios, 2014). They recommend this ratio to be less than 0.5 because this shows
Aetnas assets are financed through equity rather than financed through debt. Aetnas debt ratio
is only 0.17 so they have very little debt financing. The debt to equity ratio shows a companys
ability to pay their debts. Aetna has a debt to equity ratio of 0.59 which is much less than the
company standard in the United States of 1.5 (ReadyRatios, 2014). The calculation that
indicates how many times a firms pre-tax operating profit covers its interest expenses is called
the times-interest-earned ratio (Hawawini & Viallet, 2011, p. 152). The better Aetna is able to
meet their interest payments are reflected in a higher ratio. According to Investopedia (2014),
this ratio should be over 1.5. Aetna is at 9.55 which shows they are easily able to meet their
interest payment obligations. Their high ratio could potentially indicate that they could use some
of their debt payments for other projects that could further enhance their profit margin
(Investopedia, 2014).
Asset Management: Asset turnover ratios show how efficient a company is in using
their assets (Hawawini & Viallet, 2011). In general, the higher these numbers, the more
efficiently the company is using their assets (Swayne, et al, 2011). The asset turnover ratio

measures the dollar amount of revenue generated per dollar of investment (Swayne, et al, 2011,
p.418). There is no set number that represents a good total asset turnover value because every
industry has varying business models (ReadyRatios, 2014).
Profitability: The return on sales ratio measures the profit generated by one dollar of
sales (Hawawini & Viallet, 2011, p. 144). The return on sales ratio is best looked at over time
to develop a trend or compare the numbers to other comparable companies. Over time the return
on sales should increase, which shows the company is growing. While the return on assets ratio
is a profit measurement determined by one dollar of assets (Hawawini & Viallet, 2011). It is
also necessary to trend this data or compare to similar companies in order to evaluate it properly.
The industry average is 4%, the same as Aetna. Hawawini and Viallet (2011), state that the
return on equity ratio is the most comprehensive indicator of profitability for a company. They
assert this because this ratio takes into account all of the activities and decisions made by the
company throughout the year. According to ReadyRatios (2014), the average return on equity
for the United States is ten to twelve percent. Aetna is at fourteen percent, higher than average,
but still within the range that is desirable for a company.
Market Value: The earnings per share ratio is calculated by taking the companys
earnings after tax and dividing this by the number of shares of common stock (Hawawini &
Viallet, 2011). This number is best compared to other companies within the industry and to
watch the trends of this ratio year to year for a specific company. The price per earnings ratio is
a valuation ratio used by investors to determine whether or not to purchase shares. A price per
earnings ratio between twelve and fifteen is acceptable according to ReadyRatios (2014). In
2013, Aetnas ratio was fourteen percent, well within the acceptable range for businesses.


Financial Ratios 2013 2012 2011

Current Ratio 1.39 1.33 1.36
Operating Cash Flow
0.06 0.06 0.09
Net Working Capital 14,025.50 10,405.80 10,120.20
Debt Ratio 0.17 0.16 0.11
Debt to Equity Ratio 0.59 0.62 0.44
9.55 10.48 13.47
Asset Management
Total Assets Turnover
0.84 0.76 0.75
Asset Turnover Ratio 0.95 0.88 0.87
Return on Sales Ratio 0.05 0.05 0.03
Return on Total Assets
0.04 0.04 0.05
Return on Total Equity
0.14 0.16 0.20
Market Value
Earnings Per Share Ratio 5.28 5.07 5.68
Price/Earnings Ratio 14.10 9.13 7.43

Aetnas Three Year Trend Analysis
Reviewing their current ratio numbers show that there was a slight decline in available
working capital or cash from 2011 to 2012 and there was a definite increase from 2012 to 2013.
This shows that Aetna has easier access to cash to pay their bills (Hawawini & Viallet, 2011).
The operating cash flow ratio represents stability at the company. The net working capital
calculation shows that Aetna has increased their available working capital from 2012 to 2013.
This is a positive indication for analysts because they become concerned when this number
decreases (ReadyRatios, 2014). A decrease can represent a decreased growth in sales, that the
company is becoming too dependent upon debt financing, or may have a slowing collection of
their receivables.

The trend analysis also shows that Aetna is a very solvent company, meaning they are
financing their business through the equity in their company instead of financing with debt.
Although their debt ratio is increasing slightly each year, they are well below the industry
standard of 0.50 (ReadyRatios, 2014). Their debt to equity ratio increased quite a bit from
2011 to 2012 then dropped slightly from 2012 to 2013. The increase from 2011 to 2012 is
probably because they were being financed by creditors instead of from their own financial
sources, which is a concern for analysts (Swayne, et al, 2011). The increase from 2012 to 2013
would help to calm the concern, but this ratio would need to be watched carefully for the next
few years. The times-interest-earned ratio has decreased over the three years that we are
trending, which is going in the wrong direction. But, industry average is only 1.5, so Aetna has a
long way to go before they fall into major concern (Investopedia, 2014).
Although they are small increases year to year, Aetnas asset management ratios show
they are efficiently using their assets to produce sales (Hawawini & Viallet, 2011). The higher
the asset turnover ratios, the more sales the company is generating from its assets
(ReadyRatios, 2014).
The return on sales ratio showed an increase from 2011 to 2012 and remained constant
from 2012 to 2013. An increasing ratio means a company is growing. This ratio is best looked
at over time. At this time there may be a pause for concern with their lack of growth in the last
year. The same can be said for their return on assets. Although they are at the industry average,
you would prefer to see a small amount of growth in this calculation (Hawawini & Viallet,
2011). Again, Aetna is at the standard for their return on equity, but it has been declining each of
the last three years. Analysts will grow concerned if these profitability ratios continue to trend
down because this indicated financial troubles (ReadyRatios, 2014).

Aetnas earnings per share ratio has fluctuated throughout the last three years, while their
price per earnings ratio has steadily grown over that same period. A higher price per earnings
ratio may not always be a positive indicator because a higher price per earnings ratio may also
result from overpricing of the shares. Similarly, a lower price per earnings ratio may not always
be a negative indicator because it may mean that the share is a sleeper that has been overlooked
by the market. Therefore, price per earnings ratio should be used cautiously. Investment
decisions should not be based solely on the price per earnings ratio. It is better to use it in
conjunction with other ratios and measures (ReadyRatios, 2014).
Overall, Aetna is a very liquid and solvent company. They also manage their assets well.
Some indicators of their profitability have remained steady while others have continuously
declined, although within industry standards. The analysis of their market value shows a positive
Financial ratios are a way for the investor or stockholder to gain perspective on the
financial stability of an organization. Also, when publicly traded, anyone can view the financial
data of any company. Financial ratios usually are only used for larger firms that hold larger
inventories. Therefore, these ratios are only can aide in letting the outsiders know the
companys performance, not the value of stock. Ratios can contribute and provide great
information on many different levels of an organization. The appropriate use of financial ratios
requires detailed knowledge of an industry, but many publications will compile industry
averages to aid investors (Kelley, 2014). For example, when ratios are examined a good ratio
would be 2 to 1, having more assets than liabilities. Having a ratio of 2 would mean having twice
as many. Below are Aetnas ratios and the two top competitors that are comparable. Evaluating

these ratios will allow the investor to see how healthy a company is and how they compare, as
for financial stability and growth in the future.
Prepared by J. Kraft
Company Industry
Valuation Ratios
P/E Ratio (TTM) 12.6 17.3
P/E High - Last 5 Yrs 13 17.2
P/E Low - Last 5 Yrs 5.9 4.7
Beta 1.09 0.82
Price to Sales (TTM) 0.5 0.53
Price to Book (MRQ) 1.79 2.02
Price to Tangible Book (MRQ) 12.5 -31.91
Price to Cash Flow (TTM) 12.2 14.2
Price to Free Cash Flow (TTM) 35.1 13.5
Dividend Yield (%) 1.3 0.9
Dividend Yield - 5 Yr Avg (%) 0.9 0.8
Dividend 5 Yr Growth Rate (%) 105.14 97.49
Payout Ratio (TTM) 15 16
Sales (MRQ) vs Qtr 1 Yr Ago (%) 45.6 8.1
Sales (TTM) vs TTM 1 Yr Ago (%) 29.7 14.8
Growth Rates (%)
Sales - 5 Yr Growth Rate (%) 6.93 11.5
EPS (MRQ) vs Qtr 1 Yr Ago (%) 36.4 -2.2
EPS (TTM) vs TTM 1 Yr Ago (%) 36.4 -2.2
EPS - 5 Yr Growth Rate (%) N.A. 5.73
Capital Spending - 5 Yr Growth Rate
N.A. 18.99
Financial Strength
Quick Ratio (MRQ) N.A. 0.6
Current Ratio (MRQ) N.A. 0.7

LT Debt to Equity (MRQ) 0.53 0.46
Total Debt to Equity (MRQ) 0.58 0.52
Interest Coverage (TTM) 10.8 9.8
Profitability Ratios (%)
Gross Margin (TTM) N.A. 78.3
Gross Margin - 5 Yr Avg N.A. 83.3
EBITD Margin (TTM) 7.1 6.2
EBITD - 5 Yr Avg N.A. 0
Pre-Tax Margin (TTM) 6.5 5
Pre-Tax Margin - 5 Yr Avg 7 5.9
Management Effectiveness (%)
Net Profit Margin (TTM) 4.1 3.16
Net Profit Margin - 5 Yr Avg 4.6 3.7
Return on Assets (TTM) 4 4.3
Return on Assets - 5 Yr Avg 4.2 5
Return on Investment (TTM) 9.5 8.1
Return on Investment - 5 Yr Avg 10.8 9.7
Revenue/Employee (TTM) 1,059,675.

Net Income/Employee (TTM) 43,012.00 36,499.0

Receivable Turnover (TTM) N.A. 91.3
Inventory Turnover (TTM) N.A. 63.4
Asset Turnover (TTM) 1.1 1.4

Competitor #1
Company Industry
Valuation Ratios
P/E Ratio (TTM) 13.1 17.3
P/E High - Last 5 Yrs 11.5 17.2

P/E Low - Last 5 Yrs 3 4.7
Beta 0.59 0.82
Price to Sales (TTM) 0.4 0.53
Price to Book (MRQ) 1.16 2.02
Price to Tangible Book (MRQ) -29.43 -31.91
Price to Cash Flow (TTM) 12.2 14.2
Price to Free Cash Flow (TTM) 9 13.5
Dividend Yield (%) 1.7 0.9
Dividend Yield - 5 Yr Avg (%) N.A. 0.8
Dividend 5 Yr Growth Rate (%) N.A. 97.49
Payout Ratio (TTM) 20 16
Sales (MRQ) vs Qtr 1 Yr Ago (%) 1 8.1
Sales (TTM) vs TTM 1 Yr Ago (%) 15.1 14.8
Growth Rates (%)
Sales - 5 Yr Growth Rate (%) 2.18 11.5
EPS (MRQ) vs Qtr 1 Yr Ago (%) -20.8 -2.2
EPS (TTM) vs TTM 1 Yr Ago (%) -20.8 -2.2
EPS - 5 Yr Growth Rate (%) N.A. 5.73
Capital Spending - 5 Yr Growth Rate
N.A. 18.99
Financial Strength
Quick Ratio (MRQ) N.A. 0.6
Current Ratio (MRQ) N.A. 0.7
LT Debt to Equity (MRQ) 0.57 0.46
Total Debt to Equity (MRQ) 0.62 0.52
Interest Coverage (TTM) 7.2 9.8
Profitability Ratios (%)
Gross Margin (TTM) N.A. 78.3
Gross Margin - 5 Yr Avg N.A. 83.3
EBITD Margin (TTM) 6 6.2
EBITD - 5 Yr Avg N.A. 0
Pre-Tax Margin (TTM) 5.2 5
Pre-Tax Margin - 5 Yr Avg 7.4 5.9
Management Effectiveness (%)

Net Profit Margin (TTM) 3.2 3.16
Net Profit Margin - 5 Yr Avg 4.9 3.7
Return on Assets (TTM) 3.7 4.3
Return on Assets - 5 Yr Avg 5.7 5
Return on Investment (TTM) 6 8.1
Return on Investment - 5 Yr Avg 8.9 9.7
Revenue/Employee (TTM) 1,477,089.0

Net Income/Employee (TTM) 47,832.00 36,499.0

Receivable Turnover (TTM) N.A. 91.3
Inventory Turnover (TTM) N.A. 63.4
Asset Turnover (TTM) 1.2 1.4

Company Industry
Valuation Ratios
P/E Ratio (TTM) 13.8 17.3
P/E High - Last 5 Yrs 13.8 17.2
P/E Low - Last 5 Yrs 5 4.7
Beta 0.58 0.82
Price to Sales (TTM) 0.6 0.53
Price to Book (MRQ) 2.31 2.02
Price to Tangible Book (MRQ) -22.5 -31.91
Price to Cash Flow (TTM) 13.1 14.2
Price to Free Cash Flow (TTM) 16.7 13.5
Dividend Yield (%) 1.5 0.9
Dividend Yield - 5 Yr Avg (%) 1.1 0.8
Dividend 5 Yr Growth Rate (%) 141.64 97.49
Payout Ratio (TTM) 21 16
Sales (MRQ) vs Qtr 1 Yr Ago
4.5 8.1
Sales (TTM) vs TTM 1 Yr Ago
10.7 14.8
Growth Rates (%)

Sales - 5 Yr Growth Rate (%) 8.01 11.5
EPS (MRQ) vs Qtr 1 Yr Ago (%) -11.4 -2.2
EPS (TTM) vs TTM 1 Yr Ago
-11.4 -2.2
EPS - 5 Yr Growth Rate (%) N.A. 5.73
Capital Spending - 5 Yr Growth
Rate (%)
N.A. 18.99
Financial Strength
Quick Ratio (MRQ) N.A. 0.6
Current Ratio (MRQ) N.A. 0.7
LT Debt to Equity (MRQ) 0.46 0.46
Total Debt to Equity (MRQ) 0.52 0.52
Interest Coverage (TTM) 13.6 9.8
Profitability Ratios (%)
Gross Margin (TTM) N.A. 78.3
Gross Margin - 5 Yr Avg N.A. 83.3
EBITD Margin (TTM) 7.9 6.2
EBITD - 5 Yr Avg N.A. 0
Pre-Tax Margin (TTM) 7.3 5
Pre-Tax Margin - 5 Yr Avg 7.5 5.9
Management Effectiveness (%)
Net Profit Margin (TTM) 4.5 3.16
Net Profit Margin - 5 Yr Avg 4.8 3.7
Return on Assets (TTM) 6.9 4.3
Return on Assets - 5 Yr Avg 7 5
Return on Investment (TTM) 12.1 8.1
Return on Investment - 5 Yr Avg 12.1 9.7
Revenue/Employee (TTM) 793,955.00 1,169,132.00
Net Income/Employee (TTM) 35,462.00 36,499.00
Receivable Turnover (TTM) N.A. 91.3
Inventory Turnover (TTM) N.A. 63.4
Asset Turnover (TTM) 1.5 1.4

Through an analysis of Aetna Inc., WellPoint Inc., and United Health Group Inc. has
shown stability and growth over the last three years for all three. After evaluating these three
organizations through their most recent balance sheet, income statement, cash flow statement and

financial ratios have proven to be profitable. Which, in todays economy may still present
challenges moving into the future. Even though operating costs increased for Aetna, this was
caused from increased business growth. Aetnas two top competitors include WellPoint and
United Health Group. These firms have also shown stability for increased sales and markets as
well, but United Health Group showing the least amount of revenue in year ending 2013. Aetna
and WellPoint Inc. had the least amount of a gap in-between their revenues. Profits, asset
turnover, and liquidity seemed to show no sign of negatives moving into 2014. Aetna showed the
highest ratio for EBITD and WellPoint having the lowest of the three. Growth rate in sales
showed the highest for United Health Group over a five year period according to their ratios and
the lowest for WellPoint. Next we will take a closer look into only Aetnas Global or
international performance through analysis.
Aetna Inc. has flexible solutions through international networks that offer clients the
opportunity to support their healthcare needs. Aetna promises to deliver insurance options
globally and has been doing so for more than 30 years. They are recognized for being one of the
worlds largest providers when talking about health benefits. Aetna serves Europe, Greater
China, Latin America, North America, Southeast Asia, Africa, and the Middle East. We support
more than 500,000 members with access to our international network of more than 100,000
healthcare providers (Aetna, 2014).
Principal Market and Sales 2013 2012 2011
Northeast 5,081 4,449 4,475
Southeast 4,919 3,953 3,973
Mid-America 4,866 3,124 3,023
West 6,098 5,619 5,982
Other 1,226 1,097 1,006
Total Medical Memberships: 22,190 18,242 18,459


From 2011 through 2013, Aetna has proven to be successful in growing the market and
sales through total memberships. Even though there are financial, legal, operational, regulatory,
and economic risks internationally, Aetna has expanded in acquiring an acquisition in the
InterGlobal Group that specializes in private medical insurance for individuals overseas. With
memberships increasing from the data internationally, can only show a definitive sign for more
growth geographically in medical memberships. According to Aetna Inc. and their 10-K annual
report, will be able to enhance global penetration with individuals through customers from
acquiring InterGlobal Group. From other transactions from 2011 and InterGlobal in 2013, Aetna
Inc. is expecting to grow their memberships and increase growth that shall produce desired
results moving through 2014. According to the 10-K report, Aetnas financial performance
globally seems to be promising and is currently growing.
Looking over the financial documentation of Aetna Incorporated, it looks like the
company has been able to continue to be a sound competitor with WellPoint and United Health
Group. Aetna has continued its growth by membership as well as internationally, to help grow
the membership overseas. All this while keeping their focus on their efforts for the goal of
providing quality service and growing their membership.
Recommendations for the Next Three Years
Looking at the Financial Ratios comparison done earlier within this paper, and comparing
them to the company's two top competitors or WellPoint and United Health Care, Aetna is very
comparable and has proven to be a front runner in health care coverage. The past three years
Aetna had has proven that leadership by growing membership to include overseas entities, has
helped them to accomplish their goals. Going forward over the next three years it would be

essential for the company to continue to look at ways to increase their membership. Paying close
attention to their growth rate is stationary and not rapidly increasing too fast, that could land the
company into financial troubles.


Accounting Explained
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