Aetna 2Q Profit Climbs 9.3%, While WellPoint's Dips

Health insurer Aetna (NYSE:AET) revealed Wednesday a stronger-than-expected 19.3% increase in second-quarter profit on tighter expenses, while rival WellPoint (NYSE:WLP) saw its profit weaken on higher costs.

Aetna, based in Hartford, Conn., posted net income of $536.7 million, or $1.39 a share, compared with $450.2 million, or $1.14 a share, in the same quarter last year.

Analysts polled by Thomson Reuters were predicting on average a much weaker profit of $1.08 a share. Revenue for the three months ended June 30 was $8.23 billion, down 2% from $8.5 billion a year ago, missing the Streets view of $8.31 billion.

Meanwhile, rival health insurer WellPoint, of Indianapolis, said its earnings fell 2.9% on investment impacts and a weaker medical benefits ratio that slipped on higher costs.

The nations largest health benefits provider by membership, WellPoint reported a profit of $701.6 million, or $1.89 a share, versus $722 million, or $1.71 a share, in the same quarter last year. Excluding special items, WellPoint earned $1.83 a share, beating the Streets view of $1.80 a share.

Both companies raised their fiscal view, with Aetna now expecting a profit in the range of $4.60 to $4.70 a share, ahead of the Streets forecast of $4.39, and WellPoint forecasting $6.90 to $7.10 a share, weaker than analysts view of $7.12 a share.

Aetna, which has been attempting to diversify its portfolio through acquisitions, said the improved results were largely the result of higher commercial underwritten margins and stronger underlying performance, partially offset by the effect of lower commercial insured membership of 2011.

Also contributing to the improved performance were disciplined pricing and medical cost management, lower-than-expected use by customers of health care services, and strong cash flows.

Aetna's second-quarter financial results reflect strong operating fundamentals across the enterprise, said Mark T. Bertolini, the companys chief executive.

While total revenue in its health care segment decreased, operating earnings grew to $512.9 million from $467.4 million a year ago. Net income and revenue for the group insurance unit slipped during the quarter, but large case pensions ticked higher.

WellPoint, which also has been inking acquisitions, said its medical loss ratio, or the about of revenue used on patient care, rose to 85.7% from $82.9% in the same quarter last year on higher expenses.