UPDATE 3-Health insurer Aetna profit rises as Obamacare business shrinks

(Adds comments from conference call, recasts first paragraph)

Aug 3 (Reuters) - Aetna Inc reported a higher-than-expected quarterly profit on Thursday as member health costs were lower than anticipated, including in the Obamacare individual insurance business that it plans to exit at the end of 2017.

Shares of Aetna gained 2.6 percent to $158.79, helped by stronger results not only for individual insurance but in its small and large business division and in its government-backed Medicaid and Medicare segments. The company also raised its full-year earnings outlook.

Republican lawmakers have vowed to repeal and replace former President Barack Obama's signature healthcare law but have not yet agreed on a plan to do so or on how to shore up the individual marketplace during a transition period.

Aetna has shrunk its individual membership to 240,000 at the end of the second quarter from more than 1 million last year, citing losses on high member costs, and it will close out its individual Obamacare plans by the end of 2017.

Chief Executive Officer Mark Bertolini warned during a conference call that member costs could increase during the second half of this year, however, if individuals in its plans use more services then because they are worried about not being able to afford to buy insurance for 2018 without government subsidies.

Insurers staying in the market say uncertainty about funding has driven their provisional premium rates for 2018 up more than 20 percent.

Bertolini said health insurers need lawmakers to commit to funding subsidies in 2018 to help keep people enrolled.


Second-quarter net profit rose to $1.20 billion, or $3.60 per share, from $791 million, or $2.23 per share, a year earlier.

Excluding special items, Aetna earned $3.42 per share, blowing past the analysts' average estimate of $2.35, according to Thomson Reuters I/B/E/S.

Revenue fell nearly 3 percent to $15.52 billion.

Aetna said in May that it would exit the 2018 Obamacare individual insurance market in Delaware and Nebraska, the two remaining states where it offers the plans.

The company said it expected full-year earnings of $9.45 to $9.55 per share, excluding items. It previously had forecast $8.80 to $9.00. (Reporting by Caroline Humer in New York and Ankur Banerjee in Bengaluru; Editing by Martina D'Couto and Lisa Von Ahn)