Aetna Q4 Results Miss Estimates, Backs 2014 Outlook

(RTTNews) - Diversified healthcare benefits company Aetna, Inc. (AET) reported Wednesday a profit for the fourth quarter that nearly doubled from last year, reflecting strong revenue growth amid significantly improved memberships and contribution from the acquisition of Coventry Health Care.

Both operating earnings per share and quarterly revenues missed analysts' expectations. Aetna also reaffirmed its earnings guidance for the full-year 2014.

Aetna completed in early May the acquisition of managed health care company in a $7.3 billion deal, including assumption of debt.

"Aetna's operating results for the fourth quarter and full year continue to be supported by solid revenue growth and operating margins. Aetna performed well across our core businesses in the fourth quarter, and our Coventry Health Care business continued to operate at the high end of our projections," CFO Shawn Guertin said in a statement.

The Hartford, Connecticut-based health insurer reported net income of $368.9 million or $1.00 per share for the fourth quarter, sharply higher than $190.1 million or $0.56 per share in the year-ago quarter.

Excluding after tax amortization of other acquired intangible assets, operating earnings for the quarter was $495.4 million or $1.34 per share, compared to $317 million or $0.94 per share in the prior-year quarter.

On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $1.36 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter grew 33 percent to $13.18 billion from $9.93 billion in the comparable quarter a year ago. Operating revenues for the quarter, excluding net realized capital gains, surged 47 percent to $13.13 billion from $8.96 billion in the same quarter last year, but missed thirteen Wall Street analysts' consensus estimate of $13.14 billion by a whisker.

Healthcare premium increased to $11.15 billion from $7.27 billion in the year-ago quarter. Other premiums reached $516.4 million, up from $474.8 million in the prior-year quarter. Fees and other revenue were $1.22 billion, higher than $971.8 million last year. Net investment income edged up to $246.2 million from $240.6 million in the same quarter of 2013.

Aetna's healthcare business delivered revenues, excluding net realized capital gains, of $12.42 billion, up from $8.29 billion a year ago, and Aetna's group insurance business posted revenues, excluding net realized capital gains, of $591.3 million, up from $535.2 million a year ago.

Large case pensions business' revenues, excluding net realized capital gains, dropped to $119.3 million from $131.6 million in the previous year.

Medical membership increased 22 percent to end the fourth quarter at 22.19 million, and dental membership was 14.15 million, up from 13.62 million at the end of the year-ago quarter. Total pharmacy benefit management membership grew to 14.16 million from 8.79 million at the end of the prior-year quarter.

Total operating expenses for the quarter increased to $2.14 billion from $1.64 billion in the year-ago quarter. Healthcare costs were $9.35 billion, higher than $6.12 billion in the same quarter last year.

For fiscal 2013, the company reported net income of $1.91 billion or $5.33 per share, higher than $1.66 billion or $4.81 per share in the prior year.

Excluding items, operating earnings for the year was $2.10 billion or $5.85 per share, compared to $1.77 billion or $5.13 per share in the prior-year quarter. Analysts expected the company to report earnings of $5.87 per share for fiscal 2013.

Operating revenues for the full year, excluding net realized capital gains, grew 33 percent to $47.19 billion from $35.55 billion in the previous year. Street was looking for full-year 2013 revenues of $47.13 billion.

Looking ahead to fiscal 2014, Aetna reaffirmed its guidance for operating earnings of at least $6.25 per share, with analysts currently looking for earnings of $6.27 per share. The company now projects medical membership to increase by approximately 50,000 at the end of the first quarter of 2014.

AET closed Wednesday's regular trading session at $68.27, up $0.16 on a volume of 2.49 million shares. In the past 52-week period, the stock has been trading in a range of $46.04 to $72.16.