Insurer Aetna books US$1b profit in quarter

Business | 31 Oct 2018 11:07 am

The health insurer Aetna made US$1 billion and beat Wall Street expectations in what was likely its final full quarter as a publicly traded company before drugstore chain CVS Health takes over.

Lower federal taxes and growth in Aetna’s Medicare business helped Aetna counter a US$130-million hit it took in the third quarter from its former business in the Affordable Care Act’s insurance marketplaces.

Overall, Aetna’s net income climbed by 19 percent compared to last year’s third quarter, and it booked adjusted earnings of US$2.96 per in the three-month window that ended September 30. That topped analyst expectations by 12 US cents, according to a survey by Zacks Investment Research. Adjusted revenue, which excludes items like capital losses, grew by 3 percent to US$15.39 billion. That also beat forecasts.

CVS Health Corp. is buying Aetna, the third-largest insurer n the US, in a roughly US$69-billion deal the companies expect to complete before the end of the year. The combination received approval earlier this month from the Department of Justice on the condition that Aetna moves ahead with a plan to sell its Medicare prescription drug coverage, which would resolve some anti-monopoly concerns.

Aetna hasn’t been making annual earnings forecasts due to the pending acquisition.

Health insurance is Aetna’s main product, and the insurer covers more than 22 million people, mostly with commercial coverage sold through employers.

CVS Health Corp. wants to use that enrollment base to move deeper into managing customer health, largely through the chain’s nearly 10,000 retail stores. The company plans to expand the health services it offers at those locations and get more involved in helping patients stay on their medicines or monitor chronic conditions like diabetes. CVS Health also processes more than a billion prescriptions each year as one of the country’s biggest pharmacy benefit managers

In the third quarter, Aetna’s Medicare Advantage business grew 19 percent to cover nearly 1.8 million people. Medicare Advantage plans are privately run versions of the government’s Medicare program for people who are 65 or over or disabled.

The insurer also saw its income tax fall while benefit costs, the company’s largest expense, dropped slightly to US$10.85 billion.

Aetna took the US$130 million, pre-tax charge due to an arbitrator’s ruling in a Florida lawsuit brought by hospitals over how the insurer paid and handled claims from outside its network of providers. That was tied to coverage Aetna sold on the ACA’s individual insurance marketplace. The company pulled out of that line of business in several states after booking heavy losses.

The insurer said in a regulatory filing that it plans to appeal that arbitrator’s decision.

Aetna’s stock climbed US$1.86 to US$196.99 while broader indexes slipped after markets opened on Tuesday.

Shares of Hartford, Connecticut-based Aetna Inc. had increased 8 percent since the beginning of the year.-AP

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