By Chelsey Dulaney
Aetna Inc., which has agreed to buy fellow insurer Humana Inc.,
reported better-than-expected earnings for its second quarter as it
benefits from growth in its government business.
Aetna also raised its operating earnings guidance for the year
to $7.40 a share, from between $7.20 and $7.40 a share
previously.
Aetna in early July agreed to buy Humana, part of a rapid-fire
reconfiguration of the U.S. health-insurance industry's top
ranks.
The consolidation momentum is being fed by a desire to diversify
and cut costs following changes brought by the Affordable Care
Act.
The deal to buy Humana would boost Hartford, Conn.-based Aetna's
Medicare business and give it scale to thrive as the industry
consolidates.
In the latest quarter, Aetna said strength in its Medicare and
Medicaid businesses offset the impact of net charges incurred under
the federal health law's provisions meant to adjust for insurers'
risk if they enroll a large share of sicker, higher-cost
consumers.
The company said its overall medical membership stood at 23.7
million at the end of the quarter, up 2.5% from a year earlier.
Medicaid membership grew 4% to 2.14 million, while Medicare
Advantage membership grew 11% to 1.23 million.
The company said its total medical loss ratio, which is the
amount of premiums used to pay medical costs, was 81.1%, down from
83.1% a year earlier. Aetna said the ratio benefited from moderate
medical cost trends.
For Aetna's government business, the ratio fell to 80.3% from
86.5%, and for its commercial business it was 81.8%, up from
80.6%.
Overall, for the quarter ended June 30, Aetna reported earnings
of $731.8 million, or $2.08 a share, up from $548.8 million, or
$1.52 a share, a year ago.
Operating earnings were $2.05 a share.
Operating revenue, which excludes net realized capital gains and
losses, grew 4% to $15.13 billion.
Analysts polled by Thomson Reuters had forecast $1.82 a share in
earnings and $15.43 billion in revenue.
Last week, Humana reported a better-than-expected 25% jump in
profit in its second quarter, though revenue disappointed as the
health insurer faces challenges in its Medicare Advantage
business.
Shares of Aetna, up 29% this year, were up 0.5% to $114.38 a
share in early afternoon trading
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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