Aetna's first-quarter earnings slid nearly 7 percent as enrollment dipped, but the nation's third-largest health insurer topped Wall Street expectations and hiked its 2016 profit forecast.
The Hartford, Connecticut, company also said Thursday that it remains on track to close its roughly $35 billion acquisition of Medicare Advantage coverage provider Humana Inc. in the second half of the year. Aetna booked $65.4 million in pretax costs in the first quarter from that pending acquisition and other deals.
The insurer now expects 2016 earnings to range between $7.90 and $8.10 per share, up from its previous forecast for at least $7.75 per share. Analysts expect, on average, earnings of $7.95 per share, according to FactSet.
For the first quarter, Aetna Inc.'s net income fell to $726.6 million from $777.5 million in the previous year's first quarter. Earnings adjusted for non-recurring costs totaled $2.30 per share in the most recent quarter.
Operating revenue, which excludes investment losses, totaled $15.7 billion, helped by growth in Aetna's government business.
Analysts expected earnings of $2.22 per share on $15.51 billion in revenue, according to Zacks Investment Research.
Health insurance is Aetna's main product, and most of its enrollment comes from commercial coverage sold through employers or directly to individuals. But the insurer and its competitors also have been growing their stakes in the government-funded Medicare and Medicaid programs.
Chairman and CEO Mark Bertolini has called Aetna's government-related business a key growth engine for the company.
Nearly 50 percent of its health care premiums come from government business. Enrollment in the insurer's Medicaid and Medicare Advantage coverage grew in the first quarter, but total membership fell 3 percent to around 23 million compared to last year.
Aetna sold coverage on the Affordable Care Act's public health exchanges in 15 states and covered 911,000 people at the end of the first quarter. The insurer lost more than $100 million on its exchange business last year and hopes to break even this year.
Company leaders say they still think the exchanges are a good business opportunity, but Congress needs to give insurers more flexibility to design plans and price coverage to attract younger, healthier customers.
"I think it's premature to declare whether this is going to be a long-term, viable market or a long-term challenge market," Chief Financial Officer Shawn Guertin said.
Aetna shares climbed $1.36 to $115.16 in Thursday afternoon trading while broader indexes slipped. The stock price had advanced slightly more than 5 percent since the beginning of the year, while the Standard & Poor's 500 index has increased 2.5 percent.
Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on AET at http://www.zacks.com/ap/AET
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