Aetna Tops Expectations Though Membership Falls
April 28 2016 - 6:50AM
Dow Jones News
Aetna Inc. on Thursday reported its profit fell 6.5% in the
first quarter as a key measure of the company's medical costs rose
and membership fell.
Still, results beat expectations and the health insurance
company boosted its outlook for the year.
"We are encouraged by our first-quarter results," said Chief
Financial Officer Shawn Guertin. "Our operating results reflect the
ongoing execution of our growth strategy, and our financial
position, capital structure and liquidity all continue to be very
strong."
Aetna now projects 2016 operating earnings per share of $7.90 to
$8.10 a share, up from previous guidance for at least $7.75 a share
and straddling analysts' initial estimates for $8.05 a share,
according to Thomson Reuters.
The company said its overall medical membership fell 2.9% to
22.99 million at the end of the quarter. Medicaid membership jumped
11% to 2.3 million, while Medicare Advantage membership grew 8.5%
to 1.3 million.
Aetna's key medical-benefit ratio, which measures the amount of
premiums used to pay patient medical costs, rose to 80.5% from
79.1%. The ratio rose more for its government-based business, to
83.4% from 81.3%, than its commercial members, 77.8% from
77.4%.
Overall, for the quarter ended March 31, Aetna reported earnings
of $726.6 million, or $2.06 a share, down from $777.5 million, or
$2.20 a share, a year ago.
Operating earnings fell to $2.30 from $2.39 a share.
Operating revenue, which excludes net realized capital gains and
losses, climbed 4% to $15.69 billion.
Analysts had forecast $2.23 a share on $15.45 billion in
revenue.
Aetna in early July agreed to buy Humana Inc., 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 February, Florida's insurance regulator approved the
acquisition and required no divestitures, an important win for the
companies from a state that is a key market. The $34 billion deal
still needs to win approval from the federal Justice Department's
antitrust officials, likely the most important hurdle, as well as
other states.
On Thursday, Chief Executive Mark Bertolini said the company is
on track to close its acquisition of Humana in the second half of
the year, having obtained about two-thirds of the necessary state
change-of-control approvals required to close the transaction.
"We continue to cooperate with the Department of Justice as we
move toward a combined organization," he said.
Shares of Aetna, inactive premarket, have added 15% over the
past three months.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
April 28, 2016 07:35 ET (11:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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