* Net profit falls due to Coventry acquisition costs
* Aetna plans to be on 14 individual health exchanges
* Trend of low medical use by customers helped - analyst
By Caroline Humer
April 30 Aetna Inc on Tuesday reported a
first-quarter profit that beat analyst expectations as customers
used medical services lightly and revenue in the health
insurer's Medicare and Medicaid businesses rose 7 percent due to
The company forecast increases in enrollment and raised its
2013 profit projection to account for its better first quarter.
It also added in the negative effects of government cuts to
payments for the Medicare health plan for the elderly.
In addition, Aetna said that it was preparing for changes in
the U.S. healthcare system that will take place in 2014 under
President Barack Obama's Affordable Care Act.
That law, which has increased the number of preventive
services that insurers must offer, is expected to provide
insurance to 30 million Americans over a decade.
Aetna plans to participate in individual exchanges in 14
states, Chief Executive Mark Bertolini said during a conference
call. Previously, the company had targeted 15 exchanges.
Aetna has also begun to file applications to sell insurance
plans in some of those states, including information on
anticipated premium rates. Bertolini said in some regions those
rates reflect contracts that Aetna has negotiated with hospitals
and doctor groups. Those contracts are priced between Medicare
rates and higher private commercial rates, he said. The others
were based simply on commercial rates.
"We are not going to go in as a land grab," Bertolini said.
Premiums are expected to rise next year, particularly for
young men, as insurers must begin providing plans to more people
and must cover the cost of more preventive services.
Aetna will also sell plans on the small group exchanges,
which sell insurance to businesses, in a small number of states,
LIGHT MEDICAL SERVICES USE
Aetna's planned purchase of Coventry Health Care Inc
, which focuses on administering Medicare plans, is part
of its strategy to grow from the expansion of insurance under
The company said net income had fallen 4 percent to $490.1
million from a year earlier due to costs from the pending
Excluding those costs and capital gains, earnings rose to
$1.50 per share from $1.34. On that basis, analysts were
expecting $1.39 per share, according to Thomson Reuters I/B/E/S.
Aetna said revenue increased to $9.54 billion and that
operating expenses had fallen during the first quarter because
First-quarter results showed that U.S. consumers, hurt by
unemployment and the weak economy, continue to cut back on using
medical services, one analyst said. That helps insurers' profits
and hurts results at hospitals.
"All indications from what we've been hearing, not just from
insurance companies but from providers, is that there is a flat
trend to slightly negative trend in healthcare costs over the
past three to four months," said Vishnu Lekraj, an analyst at
Competitors like the larger UnitedHealth Group Inc
and WellPoint Inc already reported their first-quarter
earnings and said they were helped by low medical use.
Aetna said the percentage of premiums paid for medical
expenses fell in commercial insurance, but rose in its Medicare
and Medicaid divisions. Overall, the medical benefit ratio was
81.9 percent, up from 81.5 percent a year earlier.
Aetna forecast 2013 earnings of $5.50 to $5.60 per share, in
line with analysts' estimates of $5.53. It previously said it
expected a profit of at least $5.40.
Neither outlook includes the Coventry purchase, which Aetna
said would add to earnings and was due to close soon.
The new outlook does include the effects of government
sequestration, which has resulted in an across-the-board cut to
Medicare payments, Aetna Chief Financial Officer Shawn Guertin
said on the conference call.
The company had 18.3 million medical customers at the end of
March, helped by growth in its private Medicare business, and
said that number would rise slightly this year to 18.4 million.
Aetna's shares rose 2.2 percent, or $1.30, to $57.48 in
morning New York Stock Exchange trading, near their year high of