February 1, 2016 / 11:27 AM / 4 years ago

Aetna says individual exchange business improved; shares gain

(Reuters) - Health insurer Aetna Inc, which is in the process of buying smaller rival Humana Inc, said on Monday its Obamacare insurance business improved at the end of last year, providing a stronger starting point for 2016.

A trader points up at a display on the floor of the New York Stock Exchange in this August 20, 2012, file photo. REUTERS/Brendan McDermid

Aetna said its individual insurance sold on the exchanges created by the Affordable Care Act, also called Obamacare, had operating losses of about 3 to 4 percent in 2015 as fourth-quarter operations improved from mid-single digit losses earlier in the year.

The late-year improvements in that segment for Aetna contrasted with recent reports from UnitedHealth Group Inc and Anthem Inc, whose profits missed expectations because of fourth-quarter losses in the individual business.

“We are positioning that to try to get back to breakeven,” Chief Financial Officer Shawn Guertin said during a call with analysts.

That difference helped shares, said Vishnu Lekraj, an analyst at Morningstar Research.

“A lot of their peers have reported some issues as far as the exchanges go,” he said.

Aetna shares surged about 1.7 percent to $103.50 in late morning trading, while Anthem and UnitedHealth both dipped slightly.

Aetna reported a better-than-expected profit in the quarter ended Dec. 31, amid a robust performance by Aetna’s Medicare business for the elderly and disabled.

NEW RULES

Chief Executive Mark Bertolini said that new government rules were needed to stabilize the pool of customers enrolled in these subsidized insurance plans, an issue that has pushed up insurer costs. Recent changes proposed by the U.S. government do not go far enough, he said.

“We continue to have serious concerns about the sustainability of the public exchanges,” Bertolini said.

Bertolini said he still expects to close the company’s $31 billion acquisition of Humana in the second half of 2016, based on Monday’s share price.

The Aetna-Humana deal and Anthem Inc’s proposed acquisition of Cigna Corp are under intense regulatory and political scrutiny.

The company’s medical benefit ratio, which compares the amount spent on medical claims with income from premiums, improved to 81.9 percent from 83 percent a year ago.

Aetna said it expects full-year operating earnings of at least $7.75 a share, compared with $7.71 in 2015. Net income rose to $320.8 million, or 91 cents per share, in the quarter, from $232 million, or 65 cents per share, a year earlier.

Aetna’s operating earnings of $1.37 per share also beat the average analyst estimate of $1.21 per share.

Reporting by Caroline Humer in New York and Amrutha Penumudi in Bengaluru; Editing by Anil D'Silva and Bernadette Baum

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