LONDON, UK / ACCESSWIRE / August 3, 2016 / Active Wall St. announces its post-earnings coverage on Aetna Inc. (NYSE: AET). The company revealed its second-quarter fiscal 2016 financial results before the opening bell on August 02, 2016. The health insurer posted better-than-expected profit and revenue driven by reduction in portion of revenue spent on operations. Register with us now for your free membership at: http://www.activewallst.com/register/.
Today, AWS is promoting its earnings coverage on AET, touching on companies like Humana Inc. (NYSE: HUM) and Molina Healthcare, Inc. (NYSE: MOH). Get our free coverage by signing up to http://www.activewallst.com/registration-3/?symbol=AET.
Earnings Reviewed
For the three months ended on June 30, 2016, Aetna reported earnings of $790.8 million, or $2.23 per share, up from $731.8 million, or $2.08 per share, in the year ago period, reflecting the reduction of Aetna's reserve for anticipated future losses on discontinued products. The company's revenue increased 4.7% to $16 billion. Analysts estimated earnings of $2.12 per share on $15.69 billion in revenue. Operating earnings were $783.3 million, or $2.21 per share, in Q2 FY16 as compared to operating earnings of $722.1 million, or $2.05 per share, in Q2 FY15. Medical membership remained steady from Q1 FY16 at around 23.0 million participants.
"Our second quarter results are representative of the rigor with which we operate our businesses and the value of a diversified portfolio," said Mark T. Bertolini, Aetna chairman and CEO.
Merger Plans
Additionally, Aetna and Humana Inc. jointly announced that they have entered into separate agreements to divest a portion of their respective Medicare Advantage assets to Molina Healthcare, Inc. (NYSE: MOH) for a total estimated $117 million in cash, subject to the successful completion of Aetna's acquisition of Humana. Molina would add approximately 290,000 Medicare Advantage members in 21 states, preserving robust competition for seniors choosing to receive Medicare coverage through Medicare Advantage plans and addressing a key concern of the U.S. Department of Justice (DoJ) in its challenge to the Aetna-Humana transaction.
On July 21, 2016 , the DoJ filed a lawsuit to block Anthem's proposed purchase of Cigna and Aetna's planned acquisition of Humana, contending that the tie–ups would result in increased cost and reduce choices for consumers across the country, with the deal reducing the number of large, national health insurers in the nation from five to three.
"We believe that these divestitures taken together would address the Department of Justice's perceived competition concerns regarding Medicare Advantage," Aetna and Humana said in a statement.
Obamacare Plans
Aetna became the latest of the major national health insurers to project a loss on Affordable Care Act (ACA) plans for 2016, also known as Obamacare exchange. The company said it would reassess its involvement in the exchange and cancelled a planned expansion into five new state exchanges in 2017. Aetna said that it now expects a loss of more than $300 million for the fiscal year on its ACA plans amid mounting medical costs. The insurer currently has about 1.1 million individual ACA program members.
The Hartford, Connecticut headquartered company attributed the jump in Medical spending to higher costs to care for members buying plans under the ACA. Aetna's medical-benefit ratio, which reflects the share of premiums used to pay medical costs, rose to 82.4% in Q2 FY16 from 81.1% in the year ago period.
Aetna's projection marks a similar shift in tone from other insurers. On July 21, 2016, Humana announced its intent to discontinue certain on-exchange Individual products across a number of geographies for 2017 and exit substantially all ACA compliant off-exchange individual markets. Earlier Anthem Inc. went from projecting a slight profit this year to expecting a mid-single-digit loss on ACA plans. The reversal in projection is the latest sign of instability and financial pressures in the marketplaces. The problem stem from the fact that insurers have found out that members were running up medical costs higher than what the company expected at the time of setting their premiums.
Marjorie Connolly, press secretary at the Department of Health and Human Services, said in a statement that officials "have full confidence, backed by data that the Health Insurance Marketplace will continue to thrive for years ahead as a place where insurers compete for business and consumers have access to a range of affordable coverage options".
Outlook
Aetna reaffirmed its outlook with full-year 2016 operating earnings per share forecast of $7.90 to $8.10. The company also projects full-year 2016 net income per share in the range of $6.28 to $6.48. Analysts expected the company to report earnings of $8.05 per share for fiscal year 2016.
Stock Performance
Following the earnings release, Aetna's shares gained 1.10% closing August 02, 2016, session at $115.71 with a total of 2.77 million shares traded. The company's stock has gained 7.75% since the beginning of the year.
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