Operating earnings of $467.4 million for the second quarter of 2010, compared to $336.0 million for the corresponding period in 2009. The increase in operating earnings reflects $199 million ($128 million after tax) of favorable prior-period reserve development, primarily related to first quarter 2010 incurred health care costs, and improved underwriting margins, partially offset by lower Commercial Insured membership in 2010. Second quarter 2009 operating earnings included $65 million ($42 million after tax) of unfavorable prior-period development. Revenues for the second quarter of 2010 decreased by 2 percent to $7.9 billion from $8.0 billion for the second quarter of 2009. This decrease was primarily due to a decline in premium revenue resulting from lower Commercial Insured membership and a slight decline from the mix of business, partially offset by premium rate increases. Medical benefit ratios ("MBRs") for second-quarter 2010 and 2009 were as follows: Excluding prior-period reserve development, the Commercial MBRs were 83.2 percent and 84.6 percent for the second quarter of 2010 and 2009, respectively. Commercial medical costs include favorable development of prior-period health care cost estimates of approximately $160 million in 2010 (primarily related to first quarter 2010 incurred health care costs) and unfavorable development of prior-period health care cost estimates of approximately $65 million in 2009. Medicare and Medicaid medical costs for the second quarter of 2010 include $34 million and $5 million, respectively, of favorable prior-period reserve development. In the second quarter of 2009, favorable prior-period reserve development for Medicare was $13 million and unfavorable prior-period reserve development for Medicaid was $13 million. Year-to-date 2010 Commercial MBR was 80.6 percent, or 81.5 percent excluding favorable prior-period reserve development from 2009 incurred health care costs. Sequentially, second-quarter medical membership decreased by 86,000 to 18.602 million; pharmacy benefit management services membership decreased by 90,000 to 9.695 million; and dental membership decreased by 41,000 to 13.912 million. Net income of $494.6 million for the second quarter of 2010 compared with $362.8 million for the second quarter of 2009.

Group Insurance business results

Group Insurance, which includes group life, disability and long-term care products, reported:

Operating earnings of $44.4 million for the second quarter of 2010, compared with $42.5 million for the second quarter of 2009. Net income of $50.5 million for the second quarter of 2010, compared with $52.0 million for the second quarter of 2009. Revenues, excluding net realized capital gains, for the second quarter of 2010 were $517.0 million, compared with $535.7 million for the second quarter of 2009. Total revenue, which includes net realized capital gains, was $526.5 million in 2010 and $545.2 million in 2009.

Large Case Pensions business results

Large Case Pensions, which manages a variety of discontinued and other retirement and savings products, primarily qualified pension plans, reported:

Operating earnings of $6.1 million for the second quarter of 2010, compared with $7.7 million for the second quarter of 2009. Net income of $13.6 million for the second quarter of 2010, compared with $9.5 million for the second quarter of 2009.

Total company results

Revenues excluding net realized capital gains decreased 2 percent to $8.5 billion for the second quarter of 2010, compared with $8.7 billion for the second quarter of 2009. This decrease primarily reflects a decline in Health Care premium revenue primarily due to lower Commercial Insured membership in 2010 and a slight decline from the mix of business, partially offset by premium rate increases. Total Operating Expenses were $1.6 billion for the second quarter of 2010, $75.9 million higher than the second quarter of 2009. The operating expense ratio was 18.6 percent in 2010 and 17.4 percent in 2009. Including net realized capital gains and litigation-related insurance proceeds, these percentages were 18.2 percent and 16.9 percent for 2010 and 2009, respectively. Corporate Financing Interest Expense was $39.4 million and $39.5 million after tax for the second quarter of 2010 and 2009, respectively. Net Income was $491.0 million for the second quarter of 2010, compared with $346.6 million for the second quarter of 2009. Pre-tax Operating Margin was 9.2 percent for the second quarter of 2010, compared with 6.3 percent for the second quarter of 2009. For the second quarter of 2010, the after-tax net income margin was 5.7 percent compared to 4.0 percent for 2009. Share Repurchases totaled 7.8 million shares at a cost of $229 million in the second quarter of 2010.

SOURCE Aetna