Aetna tops Street in 3Q, raises 2014 forecast

Staff Writer
Columbus CEO

Aetna became the latest major health insurer to thump analyst expectations for the third quarter and then raise its forecast for 2014.

Shares of the Hartford, Connecticut, company rose in premarket trading after the nation's third-largest health insurer said its bottom line rose 15 percent in the quarter that ended Sept. 30, helped in part by enrollment gains and a growing government business.

Aetna Inc. said it now expects 2014 earnings, excluding one-time items, to range between $6.60 and $6.70 per share. That's up from a forecast it made in July for $6.45 to $6.60 per share.

It also topped average analyst expectations of $6.59 per share, according to FactSet.

Overall, Aetna earned $594.5 million, or $1.67 per share, in the third quarter. That compares to net income of $518.6 million, or $1.38 per share, the previous year.

Adjusted earnings totaled $1.79 per share.

Analysts expected, on average, $1.58 per share, according to Zacks Investment Research.

Operating revenue, which excludes investment gains and losses, grew 13 percent to $14.7 billion, which also surpassed average expectations for $14.62 billion.

Aetna trails only UnitedHealth Group Inc. and WellPoint Inc. on the list of the nation's largest health insurers. Health insurance is Aetna's main product, and that includes a growing business selling Medicare Advantage coverage and administering the state-federally funded Medicaid program.

Earlier this month, UnitedHealth reported results that topped expectations. The insurer also raised its forecast for 2014, and its executives told analysts they expect the company's overall performance to grow stronger next year and beyond.

"Actually, we think all of our businesses are really better positioned than they were as we entered into 2014," UnitedHealth CEO Stephen Hemsley said during an Oct. 16 conference call to discuss results.

Such optimism presents a big contrast to last fall, when Aetna and UnitedHealth warned about looming cuts to Medicare Advantage funding, and investors worried about the impact of the health care overhaul. The federal law launched a major expansion last fall with the debut of new state-based exchanges that would allow people to sign up for coverage, some with help from income-based tax credits.

The exchanges represented a small slice of business for insurers, but they also were a big unknown in terms of the risk that patient population would represent.

Shares of Aetna rose 52 cents to $79.70 in premarket trading about an hour and a half ahead of the opening bell. The stock had climbed 15 percent since the beginning of the year, as of Monday's close. That more than doubles the growth of the Standard & Poor's 500 index.

Shares of Aetna, UnitedHealth Group and WellPoint have all hit several all-time high prices so far this year.


Elements of this story were generated by Automated Insights using data from Zacks Investment Research. AET stock research report from Zacks.


Keywords:Aetna,Earnings Report,Priority Earnings