By Dow Jones Business News, October 29, 2013, 06:39:00 AM EDT
By Nathalie Tadena
Aetna Inc.'s ( AET ) third-quarter earnings increased 4% as the health insurer's revenue and membership rolls were
boosted by its acquisition of Coventry Health Care Inc., though the company also posted lower underwriting margins.
Health insurers have been broadly rewarded this year by signs Americans are continuing to use health services lightly,
which means fewer bills to cover. Aetna, the third-largest managed care company by membership, has said it expects to
grow its operating earnings in 2014, when health insurers are expecting to digest big changes under the complex health-
care overhaul law. The law creates opportunities to add millions of new customers by expanding coverage, but it also
adds new costs and rules governing how insurers operate.
In early May, Aetna closed on an $8.7 billion deal, including debt, to buy fellow insurer Coventry. The deal bolstered
Aetna's presence in government-financed care, although the company is still primarily focused on commercial health
insurance that people acquire through employers.
Chairman and Chief Executive Mark Bertolini said the company's latest results were bolstered by the acquisition and by
continued strong performance in the commercial and Medicaid businesses.
Aetna reported a profit of $518.6 million, up from $499.2 million a year earlier. On a per-share basis, earnings
slipped to $1.38 from $1.47 as the latest period had more shares outstanding. Excluding items such as acquisition-
related and debt-extinguishment costs, per-share operating earnings slipped to $1.50 from $1.55.
Operating revenue, which excludes net realized capital gains and losses, jumped 46% to $12.99 billion, primarily from
the addition of Coventry.
Analysts polled by Thomson Reuters had most recently forecast earnings of $1.53 a share on revenue of $12.96 billion.
Aetna's total medical benefit ratio--or the amount of premiums used to pay patient medical costs--was 83.1%, compared
with 80.7% a year earlier and 82.5% in the prior quarter.
Pretax operating margin slipped to 7.9% from 10.2% a year earlier, due to lower underwriting margins in the Medicare
Total medical membership was 22.2 million as of Sept. 30, up from 22 million in the prior quarter.
Shares of the company, which reaffirmed its full-year guidance, closed Monday at $61.78 and were inactive premarket.
The stock is up 33% year-to-date.
Write to Nathalie Tadena at firstname.lastname@example.org
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