Aetna 1Q Profit Slumps on Higher Claims

By Features FOXBusiness

Shares of Aetna (AET) tumbled nearly 11% Thursday after the company revealed a smaller first-quarter profit that missed Wall Street expectations on sharply higher medical claims.

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The third-largest U.S. health insurer said its net income fell to $511 million, or $1.43 a share, compared with a year-earlier $586 million, or $1.50 a share.

Excluding one-time items, the Hartford, Conn.-based company earned $1.34 a share, below average analyst estimates of $1.40.

While revenue climbed 6% to $8.86 billion and beat the Street’s view of $8.69 billion, the company’s earnings took a hit on a sharp jump in claims paid. Aetna spent 81.5% of premium revenue on medical claims, up from 79.2% the year earlier. Operating expenses climbed 7%.

The higher claims come despite virtually flat year-over-year membership. Aetna had about 17.92 million customers at the end of the period, up a narrow 0.6% from 2011.

But the health insurer gave an upbeat outlook for the remainder of year, predicting enrollment will grow to 18.2 million, and said earnings in its health-care group were up year-over-year on higher revenues, a reflection of increased premium yields and Medicare Advantage membership growth.

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Aetna, whose report follows stronger-than-expected results for its two larger rivals, WellPoint (WLP) and UnitedHealth (UNH), backed its full-year 2012 earnings guidance.