Aetna Inc.’s fourth-quarter profit nearly doubled, thanks in part to a $6.9 billion acquisition, but the nation’s third largest health insurer missed Wall Street’s earnings expectations.
The Hartford, Conn., company also reaffirmed a 2014 forecast for earnings that could fall below analyst predictions.
Aetna completed a deal to buy Medicare and Medicaid coverage provider Coventry Health Care in May. The biggest acquisition in the company’s history helped boost both its enrollment and premiums in the final quarter of 2013. The acquisition builds Aetna’s presence in the state- and federally-funded Medicaid program that covers poor and disabled people, and in the federally backed Medicare program for the elderly.
The insurer’s enrollment climbed about 22 percent, to 22.2 million people, in the fourth quarter, compared to the final quarter of 2012. That total puts it behind only UnitedHealth Group Inc. and WellPoint Inc. in terms of size. Health insurance is Aetna’s main product, but it also sells dental, group life and disability coverage.
Overall, Aetna earned $368.9 million, or $1 per share, in the quarter that ended Dec. 31. That’s up from $190.1 million, or 56 cents per share, a year ago, when the insurer booked some big charges to settle litigation and for the early extinguishment of debt.
Earnings, excluding one-time items like costs tied to the Coventry deal, totaled $1.34 per share. Analysts surveyed by FactSet forecast earnings of $1.36 per share.
Operating revenue, which excludes items like capital gains, soared 47 percent, to $13.13 billion. Analysts had expected $13.12 billion in revenue.
Aetna booked $143.2 million in pre-tax costs in the quarter, due largely to the Coventry deal. The insurer’s health care costs, or the amount it paid in medical claims, also spiked 53 percent in the most recent quarter, to $9.35 billion.
For the full year, Aetna reported adjusted earnings of $5.85 per share on $47.19 billion in operating revenue.
Aetna said it still expects 2014 adjusted earnings of at least $6.25 per share, which it initially forecast in December. Analysts predict, on average, $6.32 per share.
Analysts expect 2014 to be challenging for insurers, as the industry adjusts to fees, taxes and funding cuts triggered by the health care overhaul, the massive federal law that aims to pay for coverage for millions of uninsured people. The law also will give health insurers millions of new customers, but the gain companies receive from that will vary depending on how many state-based insurance exchanges they enter.
Aetna chairman and CEO Mark Bertolini said Thursday morning that the insurer’s overhaul-related business will total just 3 percent of its revenue and less than 1 percent of its profit, and it expects to lose money on that business in the first year.
On Thursday, Aetna shares dropped 35 cents, to $67.92, and then lost another 83 cents, or 1.22 percent, to $67.09 in after-market trading.