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Aetna Profit Rises as Coventry Purchase Fuels Membership

Aetna Profit Jumps 17% as Coventry Acquisition Fuels Membership
Aetna Inc. earnings excluding one-time items were $1.52, topping the $1.40 average of 18 analysts’ estimates compiled by Bloomberg. Photographer: Bob Child/AP

Aetna Inc. said profit jumped 17 percent as the third-biggest U.S. health insurer began to see a payoff from its acquisition of Coventry Health Care Inc. The company raised its 2013 earnings forecast.

Net income rose to $536 million, or $1.49 a share, in the second quarter, the Hartford, Connecticut-based carrier said in a statement today. Earnings excluding one-time items topped analyst estimates by 12 cents a share. Full-year profit is now expected to be $5.80 to $5.90 a share, Aetna said. The previous outlook was for $5.70 to $5.85.

Aetna completed its purchase of Coventry in May, part of an effort to gear up for higher growth in Medicaid and Medicare, the government insurance programs for the poor and elderly. While that deal boosted enrollment, Aetna also benefitted from low medical costs, mirroring better-than-estimated profit reports turned in this month by UnitedHealth Group Inc. and WellPoint Inc., the top two insurers.

Aetna reported “commercial and Medicaid medical costs better than expected,” said Brian Wright, a Monness, Crespi, Hardt & Co. analyst, in a note to clients today. “The addition of Coventry for two months of the quarter is likely impacting the magnitude of the increase” compared with last year.

Second-quarter revenue climbed 31 percent to $11.6 billion, the company said. Enrollment rose 22 percent to 22 million people.

Driven by Coventry

The quarter was “driven primarily by the Coventry acquisition,” said Josh Raskin, a Barclays Plc analyst in New York, in a July 16 note to clients. “Aetna has shown very strong results in recent quarters and Coventry’s results similarly ran better than expected recently.”

The Coventry deal was valued at $8.7 billion when it closed, including the assumption of $1.8 billion in debt.

Aetna’s shares declined less than 1 percent to $62.95 at the close in New York. They have gained 36 percent this year.

UnitedHealth, the biggest insurer, is based in Minnetonka, Minnesota, while WellPoint is based in Indianapolis.

Excluding acquisition costs, capital losses and other items, Aetna’s earnings per share were $1.52, beating the $1.40 average of 18 analysts’ estimates compiled by Bloomberg. Aetna reported earnings of $457.6 million, or $1.32, in last year’s second quarter.

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