Big Three US Health Insurance Corps 4Q 2012 Operating Earnings down 4%, and Annual 2012 Operating Earnings up 1%

There are three Corporations which dominate the Health Insurance landscape.  They have now all released their 4Q 2012 earnings.

How did they do?

Well, not very well.

The Total Non-GAAP Adjusted After-tax Net Income of these 3 Big Health Insurance Corps declined by 4% in the 4Q 2012 as compared with the 4Q 2011.  And all three of them had profit declines.

For the year 2012, these 3 Big Health Insurance Giants had their Total Non-GAAP Adjusted After-tax Net Income increased by a meager 1%.  And this was a substantial earnings growth deceleration from the 7% total earnings growth  in 2011 and the 13% total earnings growth in 2010.  Whoa!

All I can say is.....Thank you Kathleen Sebelius and Obamacare for eliminating some of the excess profits of these Big 3 Health Insurance Corps.  The long-term total health care cost curve has been bent back by quite a bit.

This Non-GAAP Adjusted After-tax Net Income above was used when this amount was disclosed in the company's earnings release, and it excludes Special, Unusual Items which are significant in amount relative to Reported Net Income. 

Below here is the Non-GAAP Adjusted Net Income of these three Health Insurance Corps for the 4Qs of 2012 and 2011:

	4Q 2012	4Q 2011
	Non-GAAP	Non-GAAP
	Adjusted	Adjusted	Increase	Increase
	Net	Net	(Decrease)	(Decrease)
	Income	Income	Amount	%
	mils of $s	mils of $s	mils of $s
US Big 3 Health Insurance Corps
UnitedHealth	1,244	1,258	(14)	-1%
Aetna	317	354	(37)	-10%
WellPoint	316	347	(31)	-9%
Total all 3	1,877	1,959	(82)	-4%

And below here is the Non-GAAP Adjusted Net Income of these three Health Insurance Corps for annual 2012 and 2011, along with the percentage earnings change for each of the most recent three years:

	2012	2011
	Annual	Annual	2012	2011	2010
	Non-GAAP	Non-GAAP	vs	vs	vs
	Adjusted	Adjusted	2011	2010	2009
	Net	Net	%	%	%
	Income	Income	Change	Change	Change
	mils of $s	mils of $s
UnitedHealth	5,526	5,142	7%	11%	21%
WellPoint	2,456	2,555	-4%	-9%	-4%
Aetna	1,770	1,966	-10%	26%	26%
Total all 3	9,752	9,663	1%	7%	13%

Big Four US Defense Contractor 4Q 2012 Earnings down 16%, while US Congress Twittles Its Thumbs

The Big Four US Defense Contractors have now all released their 4Q 2012 earnings.  

How did they do?

Well, frankly not well.

The Total Adjusted After-tax Net Income of these Big Four US Defense Contractors for the 4Q 2012 was $2,246 mil, which was a 16% earnings decline from the $2,661 mil earned in the 4Q 2011.

 

This Adjusted After-tax Net Income above was used when this amount was disclosed in the company's earnings release, and it excludes Special, Unusual Items which are significant in amount relative to Reported Net Income. 

 

This 16% earnings decline by the Big Four US Defense Contractors was an earnings reversal from the first nine months of 2012, where the like Total Earnings increase was 3%.

It's pretty clear that a non-action US Congress was the main driver of this major earnings reversal of these Big Four US Defense Contractors.

The Republicans in the US Congress stubbornly only want to reduce costs to resolve the remaining portion of the US Debt Grand Bargain.  The President and the Democrats in the US Congress want a fair balance between US Government Cost Cuts and additional US Tax Revenues, including the closing of some Corporate Tax Loopholes.

A substantial majority of US Citizens agree with the President on a fair balance of Cost Cuts and Additional Tax Revenues approach.

The Republicans in the US Congress, being protectorates of US Big Corporations, do not want them to have to pay a dime of Additional Tax Revenues, despite the fact that their effective tax rate paid now is extremely low, the result of both a massive number and a massive amount of Tax Loopholes the US Congress has bestowed on them.

Instead of moving the country's economy forward with wisely-designed fiscal stimulus, which is desperately needed in this continuing very weak US economy, these Republicans in the US Congress are instead only focusing all of their efforts on reducing the US Debt, and by doing so only with Cost Cuts period, including massive cuts to both Medicare Benefits and Social Security Benefits.

In addition to the Big Four US Defense Contractors, I found another 8 Corporations,which have already released their 4Q 2012 earnings, and which also derive a very significant amount of their Revenues from the US Government, and which also had Adjusted Net Income of at least $100 mil in either the 4Q 2012 or in the 4Q 2011.

How did these Big 8 Corps do in the 4Q 2012?

Well, their Total Earnings increased by only a meager 1%.

Below here are the Adjusted After-tax Net Income of each of these 12 US Defense Contractor Corps in the 4Q 2012 and in the 4Q 2011:

	4Q 2012	4Q 2011
	Non-GAAP	Non-GAAP
	Adjusted	Adjusted	Increase	Increase
Big	Net	Net	(Decrease)	(Decrease)
Corp	Income	Income	Amount	%
	mils of $s	mils of $s	mils of $s
Defense Contractors
Big Four
Lockheed Martin	713	868	(155)	-18%
Raytheon	529	593	(64)	-11%
Northrop Grumman	513	486	27	6%
General Dynamics	491	714	(223)	-31%
Total Big Four	2,246	2,661	(415)	-16%
Remaining Eight
United Technology	1,176	1,269	(93)	-7%
Boeing	1,116	1,050	66	6%
Honeywell	873	827	46	6%
L-3 Comms	212	223	(11)	-5%
Textron	163	137	26	19%
Harris Corp	139	141	(2)	-1%
RockwellCollins	132	130	2	2%
SAIC	112	117	(5)	-4%
Total Remaining Eight	3,923	3,894	29	1%
Total all 12	6,169	6,555	(386)	-6%

Northrop Grumman 4Q 2012 Non-GAAP Adjusted Net Income up 6% and Annual 2012 Earnings up 4%

Below here are reconciliations of Northrop Grumman's Net Income as Reported and its Non-GAAP Adjusted Net Income for both the 4Qs of 2012 and 2011 and for annual 2012 and 2011:

	4Q	4Q	%		Annual	Annual	%
	2012	2011	Increase		2012	2011	Increase
	mil $s	mil $s	(Decrease)		mil $s	mil $s	(Decrease)
Net Income, as Reported	533	550	-3%		1,978	2,086	-5%
Pension Adjusment	(20)	(64)			(86)	(260)
Non-GAAP Adjusted Net Income	513	486	6%		1,892	1,826	4%

And from the most recent 2011 Proxy Statement filed with the SEC, below here is the executive compensation information for Wesley Bush, the Chairman and CEO of Northrop Grumman for the two years 2010 and 2011:

				Non-equity	Increase
				Incentive	In	All
		Stock	Option	Plan	Pension	Other	Total
Year	Salary	Awards	Awards	Compensation	Value	Compensation	Compensation
	000s	000s	000s	000s	000s	000s	000s
2011	1,471	9,401	3,577	4,028	5,276	2,490	26,243
2010	1,335	8,350	7,155	3,038	700	2,272	22,850
2 Year Total	2,806	17,751	10,732	7,066	5,976	4,762	49,093

Included in Bush's All Other Compensation for 2011 was $2,228,016 for security protection.  Below here is the specific Proxy disclosure on this issue:

The 2011 All Other Compensation for Mr. Bush includes medical, dental, life and disability premiums ($51,616), Company contributions to Northrop Grumman defined contribution plans ($180,350), financial planning/income tax preparation ($22,850) and other perquisites including personal liability insurance and executive physicals for years 2009 through 2011 ($7,000). In addition, the Company incurred $2,228,016 in costs related to security protection for Mr. Bush. These costs included $250,882 attributable to personal travel, including travel expenses for family members accompanying Mr. Bush while on travel, on Company aircraft consistent with the Company’s security program.

But it gets worse on this extravagant security costs provided by Northrop Grumman.

Lewis Coleman is a Director of Northrop Grumman, and also served as Non-Executive Chairman of the Board.  In 2011, Northrop Grumman spent $5,203,559 for security protection.  Below here is the specific Proxy disclosure on this issue:

All Other Compensation amounts include expenses for residential and personal security required for Mr. Coleman. We calculate the cost of travel security coverage based on the hourly rates and overhead fees charged directly to the Company by the firms providing security personnel. If Company security personnel are used, their hourly rates are used to calculate the cost of coverage for each trip. During 2011, the Company incurred $5,203,559 in costs related to security protection related to Mr. Coleman. These costs include $1,515,536 attributable to personal and family member travel on Company aircraft consistent with our security program discussed above and a $174,953 tax gross-up.

Northrop Grumman gets a substantial portion of its Revenues and Earnings from the US Government, thus also from US taxpayers.

When you review many of the above compensation elements of Northrop Grumman related to its CEO and to its Non-Executive Chairman of the Board, it's very difficult for me to understand why the Business Roundtable is now strongly lobbying for both Social Security and Medicare Benefits for retirees to be delayed until Age 70, especially when US Government spending to US Defense Contractors has been so excessive.

Johnson & Johnson 4Q 2012 Non-GAAP Adjusted Net Income up 8% and Annual 2012 Earnings up 3%

Below here are reconciliations of Johnson & Johnson's Net Income as Reported and its Non-GAAP Adjusted Net Income for both the 4Qs of 2012 and 2011 and for annual 2012 and 2011:

	4Q	4Q	%		Annual	Annual	%
	2012	2011	Increase		2012	2011	Increase
	mil $s	mil $s			mil $s	mil $s
Net Income, as Reported	2,567	218	1078%		10,853	9,672	12%
Adjustments:
Litigation Loss	371	2,239			1,052	2,745
In Process R&D Charges	59	11			743	11
Synthes Integration/transaction and Currency-related Costs	306	338			899	477
Intangible Asset Write-downs and Other Adjustments					701
DePuy Hip Program Charges	73	336			97	426
Restructuring		(13)				536
Non-GAAP Adjusted Net Income	3,376	3,129	8%		14,345	13,867	3%

From the most recent 2011 Proxy Statement filed with the SEC, below here is the executive compensation information for William Weldon, the Chairman and CEO of Johnson & Johnson for each of the years 2009 through 2011:

				Non-equity	Increase
				Incentive	In	All
		Stock	Option	Plan	Pension	Other	Total
Year	Salary	Awards	Awards	Compensation	Value	Compensation	Compensation
	000s	000s	000s	000s	000s	000s	000s
2011	1,907	2,609	4,189	14,336	3,435	321	26,797
2010	1,851	2,774	4,713	12,043	7,085	254	28,720
2009	1,803	2,763	5,238	12,831	7,983	197	30,815
3 Yr Total	5,561	8,146	14,140	39,210	18,503	772	86,332

When you review the above compensation numbers, yeah that's $86.3 mil of Total Compensation for Johnson & Johnson's CEO  for the three years from 2009 and 2011, do you think that the US has a problem with economic fairness between the very wealthy and everyone else?

And from JNJ's most recent income tax footnote, it received total foreign tax breaks from its international and Puerto Rican operations for the three years from 2009 to 2011 of $5,947 mil, yeah that's more than $5.9 bil.

It's easy to see why the country's largest companies like JNJ want the US Debt to be reduced solely by cost cuts rather than by a combination of both costs cuts and additional US Tax Revenues.

And the Business Roundtable, which speaks for the largest US Corps, is now lobbying very heavily to delay first eligibility for both Social Security and Medicare Benefits to Age 70.  Give me a break!

Caterpillar 4Q 2012 Non-GAAP Adjusted Net Income down 37% and Annual 2012 Earnings up 20%

Below here are reconciliations of Caterpillar's Net Income as Reported and its Non-GAAP Adjusted Net Income for both the 4Qs of 2012 and 2011 and for annual 2012 and 2011:

	4Q	4Q	%		Annual	Annual	%
	2012	2011	(Decrease)		2012	2011	Increase
	mil $s	mil $s			mil $s	mil $s
Net Income, as Reported	700	1,562	-55%		5,722	4,981	15%
Adjustments:
Goodwill Impairment Charge	580				580
Favorable Tax Settlement	(300)				(300)
Non-GAAP Adjusted Net Income	980	1,562	-37%		6,002	4,981	20%

Caterpillar' 4Q 2012 Earnings Decline was a marked reversal, not just from the earnings increase in the first 9 months of 2012, but also a sharp earnings reversal from the blowout earnings increases of the past several years.

While the total number of Caterpillar's full-time worldwide workforce increased by 242 in 2012, the total number of its flexible worldwide workforce declined by 6,989 in 2012.

Procter & Gamble Dec 2012 Quarter Non-GAAP Core Pretax Operating Income up 7%

Below here are reconciliations of Procter & Gamble's Pretax Operating Income as Reported and its Non-GAAP Core Pretax Operating Income for the December Quarters of both 2012 and 2011:

	Dec	Dec
	2012	2011	%
	Quarter	Quarter	Increase
	mil $s	mil $s
Pretax Operating Income, as Reported	4,492	2,680	68%
Various Non-Core Adjustments	155	1,648
Non-GAAP Core Pretax Operating Income	4,647	4,328	7%

This Non-GAAP Core Pretax Operating Income increase of 7% in the December 2012 quarter is a slight acceleration of the 5% growth experienced in the September 2012 quarter, and much improved from such growth of the past several fiscal years.

Given that there are now so many Non-Core Adjustments, I think it would be very helpful to investors if Procter & Gamble disclosed the individual elements of its Core Income Statements.

Verizon Communications 4Q 2012 Non-GAAP Adjusted Pretax Operating Income down 5% and Annual 2012 Earnings up 12%

Below here are reconciliations of Verizon Communications' Pretax Operating Income (Loss) as Reported and its Non-GAAP Adjusted Pretax Operating Income for both the 4Qs of 2012 and 2011 and for annual 2012 and 2011:

	4Q	4Q	%		Annual	Annual	%
	2012	2011	Increase		2012	2011	Increase
	mil $s	mil $s	(Decrease)		mil $s	mil $s
Pretax Operating Income (Loss), as Reported	(3,169)	(1,112)	-185%		13,160	12,880	2%
Pretax Adjustments:
Severance, Pension & Benefit Charges	7,186	5,625			7,186	5,954
Litigation Settlement Charges					384
Other Restructuring Charges	276				276
Non-GAAP Adjusted Pretax Operating Income	4,293	4,513	-5%		21,006	18,834	12%

Lowell McAdam became Verizon's Chairman and CEO on August 1, 2011.  Previously, Ivan Seidenberg was Chairman and CEO.  From the most recent 2011 Proxy Statement filed with the SEC, below here is the executive compensation information for McAdam for the full year 2011 and for Seidenberg for each of the years 2009 through 2011:

				Non-equity	Increase
				Incentive	In	All
			Stock	Plan	Pension	Other	Total
	Year	Salary	Awards	Compensation	Value	Compensation	Compensation
		000s	000s	000s	000s	000s	000s
McAdam CEO	2011	1,400	18,750	2,363	127	481	23,121
Seidenberg CEO	2011	2,100	19,549	3,544	342	921	26,456
Seidenberg CEO	2010	2,100	24,938	3,938	265	708	31,949
Seidenberg CEO	2009	2,100	17,963	2,953	522	880	24,418
Total		7,700	81,200	12,798	1,256	2,990	105,944

And here's both McAdam's and Seidenberg's Detailed All Other Compensation for 2011:

	McAdam	Seidenberg
	000s	000s
2011 All Other Compensation Details:
Company Contributions to Non-Qualified Deferral Plan	216	449
Company Contributions to the Life Insurance Benefit	134	207
Personal Use of Company Aircraft	110	217
Other Benefits	21	48
Total 2011 All Other Compensation	481	921

When you review the above clearly extravagant compensation numbers for Verizon's CEOs, do you think that the US has a problem with economic fairness between the very wealthy and everyone else?

For the 4 years (2008 through 2011) combined of either 50% or 100% first-year bonus tax depreciation, Verizon generated a massive $49.3 bil of US Pretax Income, while at the same time, instead of paying a dime of US federal income tax, received $758 mil in US federal income tax refunds. And also in those 4 years, Verizon shed a total of 41,100 jobs.

Do you think Verizon's main emphasis is on the US Government raising Tax Revenues or on reducing US Government Spending?

Well, the Business Roundtable, which speaks for the largest US Corps, is now lobbying very heavily to delay first eligibility for both Social Security and Medicare Benefits to Age 70.  That answers this question.

AT&T 4Q 2012 Non-GAAP Adjusted Pretax Operating Income down 1% and Annual 2012 Earnings up 5%

Below here are reconciliations of AT&T's Pretax Operating Income (Loss) as Reported and its Non-GAAP Adjusted Pretax Operating Income for both the 4Qs of 2012 and 2011 and for annual 2012 and 2011:

	4Q	4Q	%		Annual	Annual	%
	2012	2011	Increase		2012	2011	Increase
	mil $s	mil $s	(Decrease)		mil $s	mil $s
Pretax Operating Income (Loss), as Reported	(5,958)	(8,990)	34%		12,997	9,218	41%
Adjustments:
Actuarial Loss on Benefit Plan	9,994	6,280			9,994	6,280
Termination of T-Mobile Acquisition Charge		4,181				4,181
Removal of Advertising Solutions		2,772			(170)	2,268
Storm Impacts	176				176
Non-GAAP Adjusted Pretax Operating Income	4,212	4,243	-1%		22,997	21,947	5%

And from the most recent 2011 Proxy Statement filed with the SEC, below here is the executive compensation information for R. Stephenson, the Chairman and CEO of AT&T:

				Non-equity	Increase
				Incentive	In	All
		Stock	Option	Plan	Pension	Other	Total
Year	Salary	Awards	Awards	Compensation	Value	Compensation	Compensation
	000s	000s	000s	000s	000s	000s	000s
2011	1,550	12,750	46	3,788	3,330	555	22,019
2010	1,533	12,750	495	5,050	7,096	417	27,341
2009	1,450	12,000	76	681	8,990	865	24,062
3 Yr Total	4,533	37,500	617	9,519	19,416	1,837	73,422

And here's Stephenson's Detailed All Other Compensation for 2009 through 2011:

			2011	2010	2009
			000s	000s	000s
Club Memberships					216
Company Paid Premiums on Supplementary Life Insurance			170	164	200
Tax Gross Ups on Life Insurance Premiums					141
Company Matching Contribution in 401(k) Plan
and Certain Make Up Contributions in Stock			167	73	70
Purchase and Deferral Plan
Personal Use of Company Aircraft			132	77	86
Many Various Personal Benefits			86	103	152
Total All Other Compensation			555	417	865

When you review the above clearly extravagant compensation numbers for AT&T's CEO, do you think that the US has a problem with economic fairness between the very wealthy and everyone else?  Yeah, that's Total Increase in Pension Value of $19.4 mil, Total  Stock Awards of $37.5 mil and Total Compensation of $73.4, all for the three years from 2009 to 2011, for the CEO of AT&T.

For 2008 and 2009 combined, when 50% bonus tax depreciation was effective in the US, AT&T generated $38.4 bil of Consolidated Pretax Income and paid $4,023 mil of US federal income tax, for an effective tax rate of only 10.5%.  And how may jobs did AT&T add in those two years (2008 and 2009) while it was receiving this massive tax largesse? Well, none, in fact it slashed 29,000 jobs, going from 310,000 at the end of 2007 to 281,000 at the end of 2009.

For 2010 and 2011 combined, when there was mostly 100% first-year bonus tax depreciation in the US, AT&T generated $25.0 bil of Consolidated Pretax Income and didn't pay a dime in total of US federal income tax, instead receiving a net total US federal income tax refund of $113 mil. And how may jobs did AT&T add in those two years (2010 and 2011) while it was receiving this incredibly massive tax largesse? Well, none, in fact it slashed an additional 25,000 jobs, going from 281,000 at the end of 2009 to 256,000 at the end of 2011.

Like so many other CEOs of the country's largest corporations, AT&T's CEO is leading the charge in reducing the US Debt.  Do you think their main emphasis is on the US Government raising Tax Revenues or on reducing US Government Spending?

Well, the Business Roundtable, which speaks for the largest US Corps, is now lobbying very heavily to delay first eligibility for both Social Security and Medicare Benefits to Age 70.  That answers this question.