Aetna Q3 Profit Misses Estimates, Confirms FY13 Forecast

(RTTNews) - Diversified healthcare benefits company Aetna Inc. (AET) reported Tuesday a higher profit in its third quarter as revenues surged with the acquisition of Coventry as well as growth in underlying Medicare membership. Operating earnings, however, missed Wall Street estimates reflecting lower underwriting margins. Further, the company confirmed its fiscal 2013 earnings forecast.

Aetna Chairman, CEO and President Mark Bertolini said, "Bolstered by the acquisition and continued strong performance in our Commercial and Medicaid businesses, Aetna generated higher operating earnings and operating revenues year over year. As we look to the final quarter of 2013, we continue to project strong year-over-year performance."

For the third quarter, net income attributable to Aetna grew 4 percent to $518.6 million from last year's $499.2 million. Earnings per share, meanwhile, fell 6 percent to $1.38 from $1.47, on higher share count. The latest quarter results included $0.09 per share of integration-related costs and $0.03 per share of net realized capital losses.

During the quarter, operating earnings, which excluded items, stood at $561.8 million or $1.50 per share, while last year's operating earnings were $523.2 million or $1.55 per share. On average, 18 analysts polled by Thomson Reuters expected earnings of $1.53 per share for the quarter. Analysts' estimates typically exclude one-time items.

The company attributed the improvement in results to the inclusion of results from the acquisition of Coventry, partially offset by lower underwriting margins primarily in underlying Medicare and Group Life businesses.

Operating margin was 7.9 percent, down from 10.2 percent a year ago.

Quarterly operating revenue was $12.99 billion, 46 percent higher than the prior-year figure of $8.90 billion. Analysts estimated revenues of $12.96 billion for the quarter.

According to the firm, the growth in operating revenues is chiefly the result of higher Commercial, Medicare and Medicaid Health Care premiums from the acquisition of Coventry as well as growth in underlying Medicare membership.

Aetna senior vice president and CFO Shawn Guertin stated that Coventry's businesses performed well, giving the firm increased confidence in its ability to achieve synergy and accretion targets.

In the quarter, Health Care segment's revenues were benefited by the inclusion of Coventry revenue as well as growth in underlying Medicare membership. As of September 30, the company's medical membership was 22.2 million, a 22 percent increase over the corresponding period in 2012.

Looking ahead, Aetna continues to expect full-year 2013 operating earnings per share to be in the range of $5.80 to $5.90, whereas 21 analysts project annual earnings of $5.89 per share.

Aetna shares closed Monday's trading at $61.78, down $0.04 or 0.06 percent. In the extended trading, shares declined $0.78 or 1.26 percent further to $61.