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Even With Net Income Down, Aetna Earnings Exceed Expectations

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By TOM MURPHY, AP Business Writer

Aetna Inc.’s second-quarter net income tumbled almost 15 percent
compared with last year when slower-than-expected growth in health
care use helped earnings. But the health insurer’s latest results
still beat analyst expectations, and it raised its 2012 earnings
forecast.

The increase, announced Tuesday, comes a day after competitor
Humana Inc. joined another insurer, WellPoint Inc., in cutting its
2012 earnings forecast after reporting second quarter results.

Those insurers pointed in part to concern over rising medical
costs.

Health insurers got a big assist last year from health care use
that grew slower than they expected when they set their premiums.

Aetna said Tuesday medical costs _ which are affected by use and
price increases for care _ will rise at a faster clip in 2012 than
they did last year, but they are still within the range the insurer
expected and below growth rates seen before the recession.

Industry observers say people tend to reign in their health care
expenses following a recession.

The Hartford, Conn., company said Tuesday that it now expects
2012 adjusted earnings, which exclude one-time items, to range
between $5 and $5.10 per share. That’s up from its previous
forecast of $5 per share. Analysts surveyed by FactSet expect, on
average, earnings of $5.04 per share.

In the second quarter, Aetna’s net income fell to $457.6
million, or $1.32 per share. That’s down from $536.7 million, or
$1.39 per share, a year ago. Adjusted earnings, which exclude
one-time items, were $1.31 per share. That topped the $1.25 per
share that analysts expected.

Revenue rose 6 percent to $8.84 billion, also above analyst
expectations of $8.75 billion.

Aetna’s performance in last year’s quarter was helped by a $188
million, pretax gain recorded because claims leftover from previous
quarters came in lower than expected. That allowed the insurer to
release money it had held in reserve. In the latest quarter, Aetna
saw a smaller, $38 million gain due to leftover claims.

Excluding the after-tax impact of these gains, the insurer’s
earnings climbed 7 percent.

Aetna said health care costs, or the amount it paid in medical
claims, rose 10 percent from to $5.91 billion.

Medical membership climbed less than 1 percent to 18 million
people compared to the first quarter.

Aetna is the third-largest commercial health insurer based on
both enrollment and revenue, trailing WellPoint and UnitedHealth.
Health insurance is Aetna’s main product, but the company also
sells dental, group life and disability coverage.

Aetna shares climbed 7 cents to $37.21 Tuesday morning, while
broader trading indexes fell slightly.

(Copyright 2012 by The Associated Press.  All Rights Reserved.)

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