Aetna Beats Profit Estimates on Government Insurance GrowthZachary Tracer
Aetna Inc., the No. 3 U.S. health insurer by enrollment, raised its full-year earnings forecast after reporting profit that topped analysts’ estimates as it added more members in government insurance programs.
Second-quarter operating profit was $2.05 a share, Hartford, Connecticut-based Aetna said Tuesday in a statement. Analysts had estimated $1.82 a share on average. Operating profit will probably be at least $7.40 a share this year, the company said, up from a forecast in April for $7.20 to $7.40.
Aetna agreed last month to buy Humana Inc. to expand in Medicare, while Anthem Inc. announced a deal for Cigna Corp. The health-insurance industry is consolidating as it absorbs new customers and contends with added regulation from President Barack Obama’s Patient Protection and Affordable Care Act.
By buying Humana for about $35 billion, Aetna gains 14.2 million medical customers, including 3.2 million in the private health plans for the elderly known as Medicare Advantage. Aetna has said it expects the deal to close in the second half of next year.
The deals have fueled a 24 percent rally this year in the index that tracks the five biggest U.S. health insurers. Aetna shares have gained 28 percent.
UnitedHealth Group Inc., the largest U.S. health insurer, raised its 2015 profit outlook last month when it reported second-quarter results. The company completed its acquisition of pharmacy-benefits manager Catamaran Corp. on July 23.
Aetna’s operating revenue rose 4 percent to $15.1 billion in the quarter due to higher premium yields and membership growth in the government-program business, the company said. Even so, that missed the average analyst estimate of $15.4 billion.
Aetna “benefited from continued moderate medical cost trends,” Chief Financial Officer Shawn Guertin said in the statement. Gains from Medicare and Medicaid offerings also more than offset the effect of “recent federal calculations on health care reform risk adjustments,” the CFO said.
The insurer improved its medical benefit ratio, which measures how much it spends of every premium dollar it spends on health-care costs. The figure was 81.1 cents in the quarter, compared with 83.1 cents per dollar a year earlier.
The company said the number of medical customers remained “essentially flat” at 23.7 million, when compared with the figure at the end of March.
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