By TOM MURPHY
INDIANAPOLIS – Aetna Inc. said Thursday its first-quarter profit rose 4 percent, as it became the fourth big health insurer in the past week to report better-than-expected earnings and raise its 2011 profit forecast.
The Hartford, Conn., company said health care costs fell and it recorded a $174 million gain in the quarter because claims left over from previous quarters came in below expectations due to lower-than-projected care use.
Several health insurers have said slower-than-expected growth in health care use – caused in part by bad weather – has helped them in recent quarters. Aetna is the third largest commercial health insurer behind WellPoint and UnitedHealth. Both of those companies and Humana Inc. have already reported first-quarter results that topped Wall Street expectations and raised their 2011 earnings forecasts.
Managed care companies had set a high bar for first-quarter earnings and guidance increases, but Aetna’s results exceed “even our recently heightened expectations,” Leerink Swann analyst Jason Gurda said in a research note.
The company’s shares jumped more than 8 percent, or $3.34, in premarket trading to $43.15.
Aetna earned $586 million, or $1.50 per share, in the three months that ended March 31. That’s up from $562.6 million, or $1.28 per share, a year ago. Revenue fell 3 percent to $8.39 billion, as enrollment dropped 5 percent.
Adjusted earnings, which exclude one-time items, were $1.43 per share.
Analysts surveyed by FactSet forecast, on average, earnings of 96 cents per share on $8.32 billion in revenue. They normally exclude one-time items from their estimates.
The insurer said it now expects full-year adjusted earnings to range between $4.20 and $4.30 per share, a big jump from its forecast in February of between $3.70 and $3.80 per share. That was much higher than analysts were expecting at the time. Analysts now expect $3.73 per share.
Aetna said health care costs, which are essentially the amount it pays in medical claims, fell 6 percent in the first quarter to $5.35 billion.
Health insurance is Aetna’s main product, but the company also sells dental, group life and disability coverage.
It said medical membership fell to 17.8 million people from 18.7 million in last year’s first quarter, as it saw losses mainly in its commercial business, which includes employer-sponsored group coverage and individual plans. That led to a 2 percent drop in health care premiums, the largest portion of Aetna’s revenue.
The insurer also said Thursday it will spend about $600 million to buy Prodigy Health Group, a privately held company that administers self-funded health plans for companies with between 100 and 5,000 employees. In self-funded plans, the employer pays the claims and assumes the risk.
The New York-based company operates in 15 states and has about 600,000 medical members.
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