BETHESDA, Md. -- Coventry Health Care Inc.'s third-quarter net income dropped 14 percent, as the health insurer's medical costs and other expenses outweighed revenue gains from an expansion of its Medicaid business.
The Bethesda, Md., company earned $105.3 million, or 78 cents per share, in the three months that ended Sept. 30, down from $122.7 million, or 83 cents per share, a year ago.
Revenue jumped 16 percent to $3.46 billion from $2.98 billion a year ago.
Analysts surveyed by FactSet expected, on average, earnings of 73 cents per share on $3.5 billion in revenue.
Revenue from Coventry's Medicaid business more than doubled to $730.9 million, as enrollment grew and the insurer started coverage last summer in Nebraska.
Medicaid is the state and federally funded program that provides health coverage to poor and disabled people. States typically hire private insurers to administer the coverage.
The insurer said its medical costs also climbed 22 percent to $2.67 billion. Selling, general and administrative expenses rose 6 percent to $521 million. Coventry said it improved its Kentucky Medicaid business, but it still produced more in medical claims than the insurer collected in premiums during the quarter.
Coventry also narrowed its 2012 earnings expectations and tweaked its full-year revenue guidance. The insurer now expects earnings of $3.25 to $3.30 per share, compared to its forecast in July for earnings of $3.10 to $3.30 per share. It forecast on Friday revenue ranging from $14.06 billion to $14.17 billion compared to expectations in July for $14.07 billion to $14.27 billion.
Analysts expect earnings of $2.74 per share on $14.16 billion in revenue.
Coventry is in the process of being acquired by another insurer, Aetna Inc., in a $5.7 billion deal expected to close in the middle of next year.