Aetna tops 4Q expectations, but 2016 outlook falls short

Aetna wrapped up 2015 with a 38-per cent surge in fourth quarter earnings but chased its better-than-expected performance with 2016 guidance that misses Wall Street forecasts.

The nation’s third largest health insurer said Monday it expects adjusted earnings of at least $7.75 per share in the new year. Analysts had been looking for per-share earnings $8.05, according to a poll by the data firm FactSet.

Aetna recorded adjusted earnings of $7.71 per share in 2015. The insurer said its initial, 2016 guidance factors in an expected first-quarter drop in commercial health insurance enrolment and an anticipated modest rise in medical cost trends, among other factors.

The 2016 forecast likely will not surprise investors, according to Goldman Sachs analyst Matthew Borsch. He said in a research note that Aetna, like other insurers, starts its forecasts conservatively and does not factor in gains the company will record due to leftover insurance claims.

Aetna also said Monday that it still expects to close its roughly $35 billion acquisition of Medicare Advantage coverage provider Humana in the second half of the year. Chairman and CEO Mark Bertolini said in a statement from the company that Aetna has been working diligently with federal and state regulators on a final approval.

Aetna’s deal and competitor Anthem’s pending acquisition of Cigna Corp. have stoked worry about competition in insurance markets, but Aetna executives have said its business largely complements Humana’s.

Wedbush analyst Sarah James said in a research note that she is growing increasingly confident that the deal will close in the second half of the year.

In the final quarter of 2015, Aetna earned $320.8 million. That compares with a $232 million profit recorded in the final quarter of 2014, when it also booked an $89.3 million charge from paying off debt early.

Adjusted earnings totalled $1.37 per share while operating revenue, which excludes which excludes investment gains, climbed 2 per cent to $15.1 billion.

Analysts forecast, on average, earnings of $1.20 per share on $14.94 billion in revenue, according to Zacks Investment Research.

Health insurance is Aetna’s main product, and most of its enrolment comes from commercial coverage sold through employers or directly to individuals. But the insurer and its competitors have been growing their stakes in the government funded Medicare and Medicaid programs.

Bertolini told analysts during a Monday conference call that government-related business has become a “key growth engine” for Aetna.

The insurer’s total medical enrolment came in nearly flat, compared to the final quarter of 2014, at about 23.5 million.

Shares of the Hartford, Connecticut, company climbed 92 cents to $102.73 Monday morning while broader indexes slipped less than 1 per cent. The stock had fallen roughly 6 per cent since the beginning of the year, while the Standard & Poor’s 500 index has decreased 5 per cent. Aetna shares climbed about 22 per cent last year before closing 2015 at $108.12.


Elements of this story were generated by Automated Insights ( using data from Zacks Investment Research. Access a Zacks stock report on AET at


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