Aetna's first-quarter net income soared 36 percent, fueled by gains from a multi-billion-dollar acquisition, and the health insurer hiked its 2014 earnings forecast above Wall Street expectations.
Its results breezed past analysts' expectations, and Aetna shares jumped more than 4 percent in premarket trading.
The Hartford, Conn., insurer closed a $6.9 billion acquisition of fellow insurer Coventry Health Care last May, and it said Thursday that deal was the main factor behind its growth in this year's first quarter.
Aetna Inc. is the nation's third-largest health insurer, and its medical enrollment swelled 24 percent in the quarter to 22.7 million people, compared to last year.
Coventry serves customers in two markets primed for growth. It administers Medicaid, the state and federally funded program that covers the needy and disabled people, and it offers Medicare Advantage plans. Those are subsidized versions of the federal government's Medicare program for the elderly and also disabled people.
The health care overhaul expanded Medicaid eligibility in several states starting this year. Medicare Advantage plans face funding cuts due to the overhaul, but retiring Baby Boomers are sparking enrollment growth in these plans, as are employers who are dropping their retiree health coverage.
Overall, Aetna earned $665.5 million, or $1.82 per share, in the quarter that ended March 31. That's up from $490.1 million, or $1.48 per share, a year earlier.
Adjusted earnings totaled $1.98 per share, not counting one-time items like a $92 million loss from the early retirement of some long-term debt and costs tied to the Coventry deal.
Analysts forecast earnings of $1.53 per share, according to FactSet.
Operating revenue excluding capital gains totaled $13.97 billion. Analysts expected about $13.6 billion in revenue.
Aetna said its revenue also grew because it raised prices or premiums on its coverage to recover fees and taxes imposed by the overhaul, starting this year.
The insurer's bottom line also was helped by a moderate flu season and harsh winter weather, which kept people home and away from doctor's offices, where they use their health insurance.
Aetna now expects 2014 adjusted earnings to range between $6.35 and $6.55 per share. It had previously forecast at least $6.25 per share.
Analysts expect $6.31 per share.
Aetna shares climbed $3.09, or 4.5 percent, to $72 in premarket trading about two hours ahead of the market open. Its shares have been almost flat so far this year.
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