Aetna booked a $381-million, first-quarter loss mainly due to its failed bid for rival Humana, but the nation's third largest health insurer still beat earnings expectations and raised its 2017 forecast.
The company said Tuesday that it is relying more on government-funded Medicaid and Medicare Advantage coverage while also cutting back on troublesome products like individual insurance that complies with the Affordable Care Act.
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Aetna and other insurers have been expanding their government business in recent years as more people become eligible for Medicare Advantage plans that care for those over age 65 and as state governments turn to insurers to manage Medicaid programs that help the poor.
Premiums collected from that business jumped 9 percent to more than $7 billion for Aetna in the quarter, surpassing commercial coverage for the first time. Chairman and CEO Mark Bertolini told analysts that government business continues to be "the predominant driver of our growth."
Overall, Aetna reported earnings of $2.71 per share, adjusted for one-time gains and costs, on $15.24 billion in operating revenue, which excludes investment income.
Analysts expected adjusted earnings of $2.36 per share on $15.48 billion in revenue, according to Zacks Investment Research.
The insurer's revenue slipped in the first quarter due partly to the suspension of a health insurance fee and a drop in commercial enrollment. Aetna, like other insurers, has drastically scaled back the coverage it sells on the Affordable Care Act's public exchanges after incurring deep losses. The insurer sold coverage on exchanges in only four states this year, compared with 15 last year.
Its individual commercial coverage, a small part of overall business, still causes problems. Aetna said Tuesday that it set aside $110 million in the quarter for greater than expected losses in 2017.
Aetna also recorded $1.2 billion in breakup and termination fees in the quarter after ending a roughly $34-billion purchase of Medicare Advantage provider Humana Inc.
Antitrust regulators had sued last summer to stop that deal and a separate combination of the insurers Anthem Inc. and Cigna Corp. last summer. Federal judges then rejected both.
Days after calling off the Humana deal, Aetna told shareholders it was doubling its quarterly cash dividend to 50 cents a share and that it would buy back more shares.
Aetna Inc. also said Tuesday that it now expects 2017 adjusted earnings of $8.80 to $9 per share, up from its previous projection for at least $8.55 per share and more in line with Wall Street forecasts.
Analysts expect, on average, earnings of $8.88 per share for 2017, according to FactSet.
Shares of Hartford, Connecticut-based Aetna hit a new all-time high price of $139.44 before retreating to $138.50 by midday. The stock has climbed about 10 percent since the start of the year.
Elements of this story were generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on AET at https://www.zacks.com/ap/AET
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