Aetna tops Street 3Q expectations, narrows 2016 forecast
Aetna's third-quarter earnings rose nearly 8 percent to top Wall Street forecasts, as growing government business and cost cutting helped counter higher costs from the health insurer's Affordable Care Act coverage.
Aetna's enrollment in government programs like Medicaid and Medicare grew 11 percent, to nearly 4.5 million people, while its much larger commercial business fell compared to last year's quarter. The insurer also said Thursday that it set aside $20 million to cover expected future losses from its individual commercial business, which includes the ACA's public insurance exchanges.
Aetna has said it has been swamped by higher-than-expected costs from that business, and it announced in August that it will chop its exchange participation down to four states in 2017, from 15 this year.
The state-based public exchanges are a key element behind the ACA's push to expand insurance coverage, but they face challenges on many fronts. Several insurers have scaled back their participation, and many that remain are seeking premium hikes of 20 percent or more.
Health insurance is Aetna's main product, and most of the 23.1 million people it covers come from commercial insurance sold through employers or directly to individuals.
Overall, the nation's third-largest health insurer earned $603.9 million in the three months that ended Sept. 30. That's up from the $560.1 million last year. Earnings adjusted for one-time items came in at $2.07 per share and operating revenue rose 5 percent to $15.74 billion.
Industry analysts had expected earnings of $2.04 per share on $15.73 billion in revenue, according to FactSet.
The Hartford, Connecticut, insurer also narrowed its 2016 forecast, dropping the top end of its range by a nickel, which pushed it just below analyst expectations. It now expects full-year adjusted earnings ranging from $7.95 to $8.05 per share.
Analysts project $8.06 per share.
Aetna Inc. shares closed at $111.01 on Wednesday and have climbed almost 3 percent so far this year, a smaller advance than growth of nearly 5 percent seen by the Standard & Poor's 500 index.