Financial Analysis for Aetna Inc., Term Paper Example

Aetna Inc. is a healthcare company based in Hartford, Connecticut, the United States that offer insurance plans and related services including medical and pharmaceutical projects. Other services include medical management, behavioral health programs, and Medicaid services, offering across different countries worldwide. Aetna Inc. provides programs and services that assist in controlling the increasing costs and strive to improve healthcare quality. It also includes information that significantly supports them in making informed decisions and financing their healthcare. The company has approximately 1.2 Million healthcare professionals in over 5,700 hospitals with approximately 670,000 primary healthcare doctors and specialists (Aetna Inc, 2018). Aetna Inc. has 48,290 employees with adjusted revenue of $60.7 billion in 2017 (Aetna Inc, 2018). UnitedHealth Group offers full health and well-being healthcare company based in the United States with the presence in more than 50 states in the US and 130 countries worldwide (UnitedHealth Group, 2018). UnitedHealth Group offers healthcare products and insurance services with its core capabilities is clinical expertise, advanced technology, and health information. The company generated $201.1 billion revenue in 2017 with a stock price of $269.2 as of 5th October 2018 (UnitedHealth Group, 2018).

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Financial Analysis

Current Ratio

Both UnitedHealth group and Aetna Inc. had a weak start in 2015, but Aetna had a slightly higher ratio. In 2016, Aetna had 1.52, which increased significantly from the previous year, indicating that it had strong short-term solvency but then dropped to 0.92 in 2017. UnitedHealth group had ratios that range between 0.69 and 0.74 that is below one showing that they have weak short-term stability and a significant problem in short-term debts. The book value of UnitedHealth group current liabilities is less than their existing assets, hence a lower level of liquidity.

Quick Ratio

Aetna's quick ratio was lowest in 2015 with 0.82 and significantly increased to 1.52 in 2016, which is the highest in the past three years. The rate then reduced to 0.92 in 2017 showing that the company had almost had the desired current assets in inventory. UnitedHealth group experienced inconsistent ratios over the past three years. The ration decreased to 0.69 in 2016 from the previous year's 0.74, though the ratio is fluctuating between 0.69 and 0.74. Throughout the three years, UnitedHealth group had lower liquidity and carried the majority of their current assets in inventory.

Debt-equity Ratio

Throughout the past three years, Aetna Inc. had a higher debt to equity ratio than UnitedHealth group. Aetna Inc. had high ratios despite the inconsistency. 2016 had the highest ratio of 2.85 with 2017 and 2015 having 2.48 and 2.30 respectively; therefore, Aetna prefers to carry more debt from its lenders than create capital using the stock available. UnitedHealth group had lower ratios with consistency, increasing from 1.75 in 2017 to 2.25 in 2015, meaning that they prefer having fewer debts and get more of its capital from stakeholders.

Capital Intensity

Both companies had inconsistency ratios during the years. However, Aetna had a higher capital intensity ratio ranging between 0.89 and 1.09. In 2016, Aetna had the highest ratio, which meant that it needed more assets to produce an equal amount of sales. Conversely, the UnitedHealth group have lower ratios ranging between 0.66 and 0.71, which meant that the company needed fewer assets to generate an equivalent quantity of sales.

Profit Margin

Aetna Inc. and UnitedHealth group have high-profit margin within the three years, but they have opposite trends. Aetna' profit margin has been reducing, and UnitedHealth Group has been increasing over the past three years. Aetna' margin is 3.15%, 3.60% and 3.97% for 2017, 2016 and 2015 respectively, attributed to a reduction in sales. UnitedHealth group's margin is 5.25%, 3.80%, and 3.70% for 2017, 2016 and 2015 respectively showing an increasing number of sales over the years.

Return on Assets

Aetna had inconsistent ratio during the years with 2015 being the highest at 4.47% than significantly reduced to 3.28 in 2016. UnitedHealth group show consistency in ratios ranging from 5.22 to 7.59 with 2017 having the highest ratio of 7.59% meaning that utilizes more on generating income using the company's assets.

Return on Equity

UnitedHealth group has outshined Aetna Inc. in generating income from equity. Aetna's return on equity ratio ranges between 3.45% and 4.47% while UnitedHealth group ranges between 12.02% and 14.77%. Therefore, UnitedHealth group appear to utilize their money from equity better to produce income while Aetna might be depending on the debt to generate revenue.

Price-Earnings Ratio

UnitedHealth Group and Aetna Inc. have opposite trends in price-earnings ratios between the years 2015 and 2017. Aetna shows an increasing trend with ratios increasing from 16.96 in 2015 to 20.68. UnitedHealth Group has a decreasing trend with ratios decreasing from 25.59 in 2015 to 14.80 in 2017. Fluctuations in the stock market make it hard to predict the ratio.

Conclusion

Although UnitedHealth group is more significant than Aetna in the United States, it does not offer the best plans. Although when an individual is concerned with financial strength and outlook, the scores can give clues on the capability to fulfill the responsibilities to pay claims. Aetna is steadily growing, and it is customer oriented, it provides plans that meet healthcare needs in every state they operate and offer advantage plans and extra coverage with quality care.

Works Cited

Aetna Inc. 2018. "Aetna Facts." Gender Reassignment Surgery - Medical Clinical Policy Bulletins | Aetna, www.aetna.com/about-us/aetna-facts-and-subsidiaries/aetna-facts.html?kbid=103485.

UnitedHealth Group. 2018. Health Benefits and Services - Home - UnitedHealth Group, www.unitedhealthgroup.com/about.html.