UPDATE 1-Coventry profit rises on Kentucky Medicaid growth

Feb 6 (Reuters) - Coventry Health Care Inc, which is being bought by larger competitor Aetna Inc, reported a higher fourth-quarter profit Wednesday that beat analysts' expectations, helped by improvements in its Kentucky Medicaid business.

The company earned a net income of $119 million, or 88 cents per share, up from $86 million, or 60 cents a share a year earlier.

Analysts had expected Coventry to have earned 67 cents a share, excluding costs relating to a transaction with Aetna Inc , according to Thomson Reuters I/B/E/S.

Coventry's state net earnings of 88 cents a share includes that cost of 3 cents per share.

Coventry and other insurers have lost money on their Medicaid contracts in Kentucky due to higher than expected claims from members, but higher rates went into effect Oct. 1 and the company narrowed its medical loss ratio there. The percentage of premiums paid for medical expenses fell by 1,170 basis points to 96.7 percent, it said.

Aetna, which said in August it would buy Coventry for $5.6 billion, awaits regulatory approval for the transaction. It is buying the regional provider of Medicare and Medicaid healthcare insurance as a bet on growth as the U.S. government expands insurance coverage to more people.

Coventry said it had an operating revenue of $3.4 billion in the fourth quarter. Analysts had expected a revenue of $3.5 billion.