What is Aetna Probability of Financial Distress (%)?
Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, Aetna's Probability of Financial Distress (%) is 0.00%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Competitive Comparison of Aetna's Probability of Financial Distress (%)
For the Healthcare Plans subindustry, Aetna's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Aetna's Probability of Financial Distress (%) Distribution in the Healthcare Plans Industry
For the Healthcare Plans industry and Healthcare sector, Aetna's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where Aetna's Probability of Financial Distress (%) falls into.
Aetna Probability of Financial Distress (%) Calculation
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
| LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
| = | 0.00 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.00% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
3. CASHMTA = Cash to Market Total Assets
For insurance companies, CASHMTA is measured as:
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
| RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
Aetna (AET) Business Description
Traded in Other Exchanges
N/A
Address
Aetna is one of the largest managed-care organizations in the U.S., with over 22 million medical members. This large member count helps the firm diversify its operating risk and has formed the basis for material competitive advantages. The firm provides health insurance services to its members through products that encompass every major insurance market--individual, group, and government sponsored. Aetna and CVS recently announced their intention to merge operations, and if approved, it would form one of the most powerful players within the healthcare space.
Executives
| Fernando Aguirre |
director |
CHIQUITA BRANDS INTERNATIONAL, 250 EAST FIFTH STREET, CINCINNATI OH 45202 |
| Harold L Paz |
officer: EVP & Chief Medical Officer |
AETNA INC., 151 FARMINGTON AVENUE, HARTFORD CT 06156 |
| Molly Joel Coye |
director |
AETNA INC, 151 FARMINGTON AVENUE, HARTFORD CT 06156 |
| Jeffrey E Garten |
director |
AETNA INC., 151 FARMINGTON AVENUE, HARTFORD CT 06156 |
| Frank M Clark |
director |
AETNA INC., 151 FARMINGTON AVENUE, HARTFORD CT 06156 |
| Shawn M Guertin |
officer: Exec. Vice President, CFO |
TRINET GROUP, INC., ONE PARK PLACE, SUITE 600, DUBLIN CA 94568 |
| Mark T Bertolini |
director, officer: Chairman and CEO |
AETNA INC., 151 FARMINGTON AVENUE, HARTFORD CT 06156 |
| Karen S Lynch |
officer: President |
151 FARMINGTON AVENUE, RW61, HARTFORD CT 06156 |
| Roger N Farah |
director |
POLO RALPH LAUREN CORP, 650 MADISON AVE, NEW YORK NY 10022 |
| Ellen M Hancock |
director |
126 LIMESTONE ROAD, RIDGEFIELD CT 06877 |
| Edward J Ludwig |
director |
C/O BECTON DICKERSON & CO, 1 BECTON DR, FRANKLIN LAKES NJ 07417 |
| Margaret M Mccarthy |
officer: EVP, Operations & Technology |
AETNA INC., 151 FARMINGTON AVENUE, HARTFORD CT 06156 |
| Olympia J. Snowe |
director |
100 E. PRATT STREET, BALTIMORE MD 21202 |
| Heather Brianne Dixon |
officer: VP, Controller & CAO |
AETNA INC., 151 FARMINGTON AVENUE, HARTFORD CT 06156 |
| Sabatino Thomas J Jr |
officer: EVP & General Counsel |
C/O JAN STERN REED BAXTER INTERNATIONAL, ONE BAXTER PARKWAY DF2 2W, DEERFIELD IL 60015 |
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