Aetna's first-quarter net income soared 36 percent, fueled by gains from a multi-billion-dollar acquisition, and the health insurer hiked its 2014 earnings forecast above Wall Street estimates.
Its results breezed past analysts' expectations, and Aetna shares jumped more than 5 percent Thursday after it detailed a starkly different quarter compared with competitor UnitedHealth Group, which dragged down other health insurance stocks last week after it said first quarter earnings fell 8 percent.
Aetna completed a $6.9 billion acquisition of fellow insurer Coventry Health Care last May, and it said Thursday that deal was the main factor behind its growth in this year's first quarter. The Hartford, Conn., insurer's medical enrollment swelled about 24 percent in the quarter to 22.7 million people versus last year.
Coventry serves customers in two markets primed for growth. It administers Medicaid, the state and federally funded program that covers the needy and disabled people, and it offers Medicare Advantage plans. Those are subsidized versions of the federal government's Medicare program for the elderly and also disabled people.
Aetna Inc. reaped large, year-over-year gains in both those categories during the quarter. It also added another 230,000 paying customers through public insurance exchanges that debuted this year, courtesy of the health care overhaul. The federal law set up state-based exchanges on which customers can shop for coverage with help from income-based tax credits.
Aetna expects to add about 450,000 paying customers this year through the exchanges, and company officials said the risk of that business appears to be manageable so far, although they cautioned that they still don't have a good sense for what types of claims these customers will generate.
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