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Aetna posted first quarter 2013 earnings of $495 million or $1.50 per share – a 12 percent year-over-year increase – as membership continues to grow and is expected to reach 18.4 million by year's end.
[See also: Aetna 4Q earnings drop due to lawsuit settlement charges]
The company also raised its fiscal year 2013 outlook by about 10 cents, projecting operating earnings of $5.50 to $5.60 per share.
Aetna CEO and Chairman Mark Bertolini said in a conference call that the first quarter results show "the strength of our diversified business model," noting the company's launch of its population health business division, Healthagen, which offers a range of analytics, wellness, clinical support and mobile health technology for providers, employers, payers and consumers.
The company's membership growth was driven largely by Medicare Advantage, which added 180,000 members in the first quarter and now stands at 628,000, along with 313,000 supplemental Medicare members.
Bertolini said the company now has 73 Medicare Advantage collaboration projects, including accountable care organizations, and has the goal of placing half of its Medicare Advantage members in ACOs or provider collaborations by the end of 2013.
Bertolini noted that the company recently won a contract in Virginia to provided administrative services for self-funded insurance to public employee retirees, and is bidding on a joint venture in China to offer its health management technology.
[See also: Aetna puts its tech to work]
He also noted that the company is starting to submit plans and rates to public health insurance exchanges. Aetna is planning to sell individual plans in public exchanges in 14 states – one fewer than projections last quarter, one Wall Street analyst noted – and will be selling in the small business SHOP exchanges in "a handful of states," he said.
"We're entering these exchanges carefully," Bertolini said in response to questions during a conference call, adding that they're planning to sell in HIXs in markets where they already have established provider contracts. And, he noted: "We have the option to pull out in September."
Bertolini did sound somewhat bullish on private HIXs, though, with Aetna now selling in 11 corporate exchanges and potentially looking to others. "Private exchanges are emerging that will provide affordable alternatives to small employers without having to go into the public exchanges," Bertolini said.
Aetna's group insurance business saw operating earnings of $31.2 million in 2013's first quarter – down from $40.9 million the previous year – as a result of higher expenses from the growth of life and disability products, with net income of $34.8 million, compared to $48.8 million the year before.
The company also lost some commercial membership – about 90,000 – during the first quarter, while membership overall grow by 50,000 this year, to nearly 18.3 million.
In response to an analyst's question on that commercial membership drop, Shawn Guertin, Aetna's senior senior vice president, chief financial officer and chief enterprise risk officer, said: "We'll favor margin over membership on this."
The company had a medical loss ratio of 81.9 percent in its combined business sectors – slightly more than first quarter 2012's 81.5 percent – with 78.9 percent ratio in its commercial sector, 87.8 percent in Medicare Advantage and 89.3 percent in Medicaid.
Several analysts noted that Aetna's outlook doesn't include the soon-to-be-finalized acquisition of Coventry, which could add a dime or two to per-share earnings, as Citi's Carl McDonald estimated.