Aetna beat analysts’ expectations with third-quarter earnings that benefited from higher premiums and lower medical costs.
“Our emerging businesses strategy continues to see positive results from collaboration with providers, including lower costs, higher care quality and added membership for our core businesses,” said Aetna CEO Mark T. Bertolini.
Net income was $499.2 million for the three-month period ending Sept. 30, or $1.47 per share, compare with $490.4, or $1.30 per share, during the same period a year ago. The net income includes a 7-cent-per-share loss to get rid of long-term debt and 4 cents per share on transaction costs related to acquiring Coventry Health Care Inc.
Aetna announced in August its plans to acquire Coventry Health Care of Bethesda, Md., for $5.6 billion to position the company for growth in Medicare and Medicaid. Aetna will take on Coventry’s debt for a total transaction cost of $7.3 billion.
Operating earnings were $523.2 million, or $1.55 per share, compared with $528.4 million, or $1.40 per share, during the same period in 2011. Analysts polled by Thomson Reuters were expecting $1.34 per share.
Revenue was up 6 percent to $8.9 billion from $8.4 billion, driven partly by membership which grew by 149,000 to 18.2 million.
Health insurers are required by the Affordable Care Act, sometimes called Obamacare, to spend a minimum amount of premium revenue on medical expenses for customers: 85 cents of each premium dollar in large-group plans and 80 cents for small-group and individual plans.
The percentage of medical expenses divided by premium revenue is called the medical-cost ratio. Aetna had a third-quarter medical-loss ratio of 79.6 percent on all of its commercial accounts, up from 77.8 percent last year.
Aetna’s workforce in Connecticut declined from about 6,700 as of June 30 to about 6,650 as of Sept. 30. The company had more employees overall, increasing from 34,800 as of June 30 to 35,050 as of Sept. 30.
Goldman Sachs & Co. analysts Matthew Borsch and Sam Wass said, “As expected, favorable healthcare cost trends boosted results for Aetna, which is consistent with (UnitedHealthcare’s third quarter earnings) last week and also relatively weak volume figures from many of the (health care) product and provider companies reporting 3Q so far.”
The Hartford-based health insurer’s shares were up 36 cents to $44.31 in afternoon trading.