Health insurer Aetna's quarterly profit beats

Reuters with CNBC.com
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Aetna, whose $34 billion deal for Humana was blocked last week, reported quarterly profit ahead of estimates on Tuesday, helped by higher premiums for its insurance plans and lower-than-expected medical costs.

Aetna's results come nearly two weeks after Republican President Donald Trump signed his first executive order, directing the federal government to scale back regulations, taxes and penalties under the Affordable Care Act, popularly known as Obamacare.

Insurers, including UnitedHealth and Aetna, largely pulled out of these plans for 2017, saying they were losing too much money.

Aetna's net profit fell to $139 million, or 39 cents per share, in the fourth quarter ended Dec. 31, from $321 million, or 91 cents per share, a year earlier.

Excluding items, Aetna earned $1.63 per share, handily beating analysts' average estimate of $1.44 per share, according to Thomson Reuters I/B/E/S.

Aetna said its total health care medical benefit ratio — the percent of premiums spent on claims — rose to 82.1 percent from 81.9 percent, a year earlier, mainly due to higher medical costs in its individual commercial products.

The No. 3 U.S. health insurer's total revenue rose about 5 percent to $15.73 billion but was below analysts' average estimate of $15.86 billion.

Total medical membership came in at 23.1 million at the end of December, lower than 23.49 million, a year earlier.

The company said it expects 2017 operating earnings of at least $8.55 per share. Analysts' on average estimated earnings of $8.79 per share.

The decrease in quarterly net income was primarily due to an increase in restructuring costs, which included a $215 million expense recorded during the quarter related to a voluntary early retirement program.

Restructuring costs and exchange medical loss ratio pressured the quarter but was offset by performance in the government and group insurance businesses, Piper Jaffray analyst Sarah James said.

Aetna and Humana have said they will consider all available options for their proposed merger after a court ruled against the deal, saying it would lower competition.

"We believe this combination will provide a better product for seniors, a better product for the Medicaid population [that is] more affordable and simpler," Aetna chairman and CEO Mark Bertolini told CNBC's "Squawk Alley" on Tuesday.

"We're disappointed where we are now, but until Feb. 15 we really don't need to make a call and we're doing all of the homework necessary now to understand what our next steps could be," he said, referring to the merger agreement's extended deadline.

The court ruling also casts doubt on Anthem's proposed $54 billion deal to buy fellow health insurer Cigna.

The Justice Department filed a lawsuit last July to block the two deals, arguing they would lead to higher prices. A court ruling on the Anthem-Cigna deal is pending.