Aetna Inc. (AET:US) said profit jumped 17 percent as the third-biggest U.S. health insurer began to see a payoff from its acquisition of Coventry Health Care Inc. The company raised its 2013 earnings forecast.
Net income rose to $536 million, or $1.49 a share, in the second quarter, the Hartford, Connecticut-based carrier said in a statement today. Earnings excluding one-time items topped analyst estimates by 12 cents a share. Full-year profit is now expected to be $5.80 to $5.90 a share, Aetna said. The previous outlook was for $5.70 to $5.85.
Aetna completed its purchase of Coventry in May, part of an effort to gear up for higher growth (AET:US) in Medicaid and Medicare, the government insurance programs for the poor and elderly. While that deal boosted enrollment, Aetna also benefitted from low medical costs, mirroring better-than-estimated profit reports turned in this month by UnitedHealth Group Inc. and WellPoint Inc. (WLP:US), the top two insurers.
Aetna reported “commercial and Medicaid medical costs better than expected,” said Brian Wright, a Monness, Crespi, Hardt & Co. analyst, in a note to clients today. “The addition of Coventry for two months of the quarter is likely impacting the magnitude of the increase” compared with last year.
Second-quarter revenue climbed 31 percent to $11.6 billion, the company said. Enrollment rose 22 percent to 22 million people.
Driven by Coventry
The quarter was “driven primarily by the Coventry acquisition,” said Josh Raskin, a Barclays Plc analyst in New York, in a July 16 note to clients. “Aetna has shown very strong results in recent quarters and Coventry’s results similarly ran better than expected recently.”
The Coventry deal was valued at $8.7 billion when it closed, including the assumption of $1.8 billion in debt.
Aetna’s shares declined less than 1 percent to $62.95 at the close in New York. They have gained 36 percent this year.
UnitedHealth (UNH:US), the biggest insurer, is based in Minnetonka, Minnesota, while WellPoint is based in Indianapolis.
Excluding acquisition costs, capital losses and other items, Aetna’s earnings per share were $1.52, beating the $1.40 average of 18 analysts’ estimates (AET:US) compiled by Bloomberg. Aetna reported earnings of $457.6 million, or $1.32, in last year’s second quarter.
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