Citing continued sluggish increases in healthcare utilization, Aetna yesterday posted a third quarter profit of $523.2 million, or $1.55 per share, a per share increase of 11 percent over the third quarter of 2011 when the company posted profits of $1.40 per share.
"Aetna's third quarter result reinforces the value of our diversified business model, demonstrates our margin discipline and exemplifies the rigor with which we manage our operations," said Mark T. Bertolini, president, chairman and CEO of Aetna in a conference call announcing the results. "Underlying our third quarter results, Aetna grew healthcare premiums by 7 percent over the prior year quarter, with growth across multiple lines of business."
Net income for the third quarter of 2012 was $499.2 million, or $1.47 per share, and includes a $.07 per share loss on the early extinguishment of long-term debt, $.04 per share of transaction-related costs associated with the proposed acquisition of Coventry Health Care, Inc. and $.03 per share of net realized capital gains.
Consensus analyst estimates as compiled by Thomson Reuters anticipated a decline in net income per share to $1.34 for the third quarter. Based on this performance Aetna raised its full year earnings guidance to $5.10 per share, up from a July estimate of $5 to $5.10. Aetna management said they were not raising estimates more, saying that even though they beat their own internal Q3 targets, they didn't beat them by as much as they beat the consensus estimates.
Aetna also announced that it has already achieved its targeted growth in members for the year, adding 149,000 new members in the quarter to reach nearly 18.2 million members. Growth was strong across its commercial, Medicare and Medicaid business lines.
Aetna's membership is expected to grow significantly in mid-2013 when the company completes its $1.5 billion dollar acquisition of Coventry Health Care, which will increase the company's member base by more than 20 percent, adding roughly 5 million new members.
Adding members via the acquisition may be the best route to growth in 2013 noted Joseph M. Zubretsky, Aetna senior executive vice president and CFO, in yesterday's earnings call.
"Commercial insured membership growth opportunities may be limited by the lack of employment growth," Zubretsky said. "We will not attempt to aggressively increase market share and put at risk the maintenance of our margin profile. When faced with the choice, Aetna will always choose margins over membership."
Investors treated the earnings release favorably, bidding Aetna shares up 1 percent on the day to close at $44.43.