Health insurer Aetna Inc. (AET: Quote) reported Tuesday a decline in second-quarter profit, even as revenues were benefited by increased membership in Medicare unit and acquisitions. Quarterly earnings per share and revenues topped Street projections. Further, the company lifted its fiscal 2012 earnings forecast.
Mark Bertolini, chairman, CEO and president, said, "Aetna's solid second-quarter financial results build upon our strong performance in the first quarter. Our results confirm the confidence we have heading into the second half of the year... membership and revenues are growing; we are pricing with discipline; and medical cost trend is in line with our projections."
For the quarter, net income fell 15 percent to $457.6 million, while the decline in earnings per share were 5 percent to $1.32 reflecting lower share count.
Operating earnings, which excluded capital gains, fell 14 percent to $452 million and earnings per share declined 3 percent to $1.31 from $1.35 in 2011. On average, 20 analysts polled by Thomson Reuters expected earnings of $1.25 per share for the quarter. Analysts' estimates typically exclude one-time items.
The results reflected a sharp decline in favorable before-tax prior-period reserve development in the health care segment. Excluding this development, operating earnings increased to $427.9 million from $401.5 million last year, due mainly to higher underwriting margins and increased membership in Medicare unit.
Pre-tax operating margin in the quarter fell to 8.9 percent from 10.7 percent a year ago.
Revenues for the quarter increased 6 percent to $8.83 billion from last year's $8.32 billion, while analysts estimated revenues of $8.81 billion.
According to the company, the increase was due to higher Medicare premium from Medicare Advantage membership growth and the addition of Genworth's Medicare Supplement business, higher Commercial Health Care premium and higher fees and other revenue primarily from the other 2011 acquisitions. These were partially offset by lower Commercial Insured membership.
Total medical benefit ratio was 82.4 percent, higher than 79.7 percent a year ago. Medical benefit ratio of Commercial and Medicaid increased, while that of Medicare declined from last year.
In the quarter, medical membership totaled 18.03 million members as of June 30, lower than last year's 18.24 million members, mainly due to decline in commercial, and Medicaid memberships.
For fiscal 2012, the company now projects full-year 2012 operating earnings per share to be $5 to $5.10, versus its earlier estimate of about $5. Twenty-two analysts project earnings per share of $5.04 for the full year.
Aetna added that it continues to project membership growth for 2012.
"We are optimistic about our ability to sustain momentum into 2013, with wins such as the new group Medicare opportunity awarded by our long-standing customer Teacher Retirement System of Texas to convert existing commercial members into Medicare Advantage members," Aetna said.
Aetna shares closed Monday's regular trading session at $37.14, up $0.47 or 1.28 percent.
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by RTT Staff Writer
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