By Chelsey Dulaney
Aetna Inc. boosted its profit outlook for the year again on
Tuesday as the health insurer's government business helped drive
better-than-expected earnings for the first three months of the
year.
Aetna said it now expects $7.20 to $7.40 a share in earnings for
2015, up from its previous call for at least $7 a share in
earnings.
Shares, up 20.4% this year, gained 2.6% in premarket
trading.
Aetna, like its rival health insurers, has benefited from higher
enrollments driven by requirements under the federal Affordable
Care Act. However, the industry has maintained concerns over rising
care costs, particularly for expensive new drugs to treat hepatitis
C.
Aetna said earlier this year that it expects to benefit from a
deal to receive better pricing from Gilead Sciences Inc., maker of
the hepatitis C drugs Harvoni and Sovaldi.
In the latest quarter, results were driven by membership growth
and higher underwriting margins, especially in its government
business, where Aetna said it took action to solve the gap between
Medicare premiums and medical costs and other expenses.
The company said its overall medical membership stood at 23.7
million at the end of the quarter, up from 22.7 million a year ago.
Medicaid membership grew 6.1% to 2.1 million, while Medicare
Advantage membership was up 11.5% to 1.23 million.
The company said its total medical benefit ratio, which is the
amount of premiums used to pay medical costs, was 79.1%, down from
80.4% a year ago. For Aetna's government business, the ratio fell
to 81.3% from 84.7% a year ago, and for its commercial business it
was 77.4%, up from 77.2% a year ago.
Health-care costs rose 6.9% to $10.2 billion.
Overall, for the quarter ended March 31, Aetna reported earnings
of $777.5 million, or $2.20 a share, up from $665.5 million, or
$1.82 a share, a year ago.
Operating earnings were $2.39 a share, topping analysts forecast
for $1.95 a share in earnings.
Operating revenue, which excludes net realized capital gains and
losses, grew 8% to $15.1 billion. Analysts had expected $15.5
billion in revenue.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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