07/30/2013 06:28 EDT | Updated 09/29/2013 05:12 EDT

Health insurer Aetna's 2nd-quarter profit rises 17 per cent, helped by Coventry acquisition

Aetna Inc.'s second-quarter earnings jumped 17 per cent, and the health insurer raised its 2013 forecast as it reaped revenue and enrolment gains from its acquisition of fellow insurer Coventry Health Care.

The Hartford, Conn., company said Tuesday that it earned $536 million, or $1.49 per share, in the three months that ended June 30. That's up from $457.6 million, or $1.32 per share, a year ago.

Adjusted earnings totalled $1.52 per share, excluding capital losses and one-time items such as costs tied to the Coventry deal.

Revenue climbed 31 per cent to $11.56 billion, also excluding items like capital losses.

Analysts forecast earnings of $1.40 per share on about $11.9 billion in revenue, according to FactSet.

Aetna is the nation's third-largest health insurer, trailing UnitedHealth Group Inc. and WellPoint Inc. in enrolment. Health insurance is Aetna's main product, but the company also sells dental, group life and disability coverage.

The insurer closed its $6.9 billion acquisition of Coventry Health Care Inc. in May and had raised its full-year earnings forecast then. The acquisition, announced last year, will help Aetna build its presence in the state- and federally funded Medicaid program that covers poor and disabled people and the federally backed Medicare program for the elderly.

Growth in both those segments helped raise Aetna's medical membership 21 per cent to nearly 22 million people, compared to last year. The company's commercial enrolment, which includes individual and employer-sponsored health insurance, also jumped 15 per cent to 18.6 million.

Aetna booked $101.3 million in costs tied to the Coventry deal in the quarter, but it also cut expenses by $42.2 million and recorded a gain of nearly $7.2 million after reaching a reinsurance settlement.

Aetna now expects 2013 adjusted earnings of between $5.80 and $5.90 per share, up from its previous projection of $5.70 to $5.85 per share.

Analysts had expected, on average, $5.80 per share.

Barclays analyst Joshua Raskin said in a research note the insurer turned in a "very strong" quarter with a surprising second boost to its 2013 forecast, after having already raised the guidance when it closed the Coventry deal.

Aetna Chairman and CEO Mark Bertolini told analysts Tuesday morning, the company also was growing increasingly confident that it will be able to increase earnings in 2014, although he declined to get into specifics.

Some key elements to the federal health care overhaul law will start to unfold for next year, when state and federally funded Medicaid program expands in several states. Insurance customers will be able to buy coverage on health insurance exchanges, many with help from income-based subsidies.

Bertolini told analysts the company will still take a cautious approach to the state-based exchanges and plans to participate in about 15 next year.

Aetna competitors UnitedHealth Group Inc. and WellPoint Inc. have already reported second-quarter earnings that trounced expectations.

Shares of Aetna fell 45 cents to $62.95 in trading Tuesday but drifted 37 cents higher to $63.32 in after-hours trading. The stock had been up about 37 per cent so far this year after closing 2012 at $46.31.