AET Aetna Inc. (delisted)

By Anne Steele 

Aetna Inc. on Thursday reported its profit fell 6.5% in the first quarter as a key measure of the company's medical costs rose and membership fell.

Still, results beat expectations and the health insurance company boosted its outlook for the year.

"We are encouraged by our first-quarter results," said Chief Financial Officer Shawn Guertin. "Our operating results reflect the ongoing execution of our growth strategy, and our financial position, capital structure and liquidity all continue to be very strong."

Aetna now projects 2016 operating earnings per share of $7.90 to $8.10 a share, up from previous guidance for at least $7.75 a share and straddling analysts' initial estimates for $8.05 a share, according to Thomson Reuters.

The company said its overall medical membership fell 2.9% to 22.99 million at the end of the quarter. Medicaid membership jumped 11% to 2.3 million, while Medicare Advantage membership grew 8.5% to 1.3 million.

Aetna's key medical-benefit ratio, which measures the amount of premiums used to pay patient medical costs, rose to 80.5% from 79.1%. The ratio rose more for its government-based business, to 83.4% from 81.3%, than its commercial members, 77.8% from 77.4%.

Overall, for the quarter ended March 31, Aetna reported earnings of $726.6 million, or $2.06 a share, down from $777.5 million, or $2.20 a share, a year ago.

Operating earnings fell to $2.30 from $2.39 a share.

Operating revenue, which excludes net realized capital gains and losses, climbed 4% to $15.69 billion.

Analysts had forecast $2.23 a share on $15.45 billion in revenue.

Aetna in early July agreed to buy Humana Inc., part of a rapid-fire reconfiguration of the U.S. health-insurance industry's top ranks. The consolidation momentum is being fed by a desire to diversify and cut costs following changes brought by the Affordable Care Act. The deal to buy Humana would boost Hartford, Conn.-based Aetna's Medicare business and give it scale to thrive as the industry consolidates.

In February, Florida's insurance regulator approved the acquisition and required no divestitures, an important win for the companies from a state that is a key market. The $34 billion deal still needs to win approval from the federal Justice Department's antitrust officials, likely the most important hurdle, as well as other states.

On Thursday, Chief Executive Mark Bertolini said the company is on track to close its acquisition of Humana in the second half of the year, having obtained about two-thirds of the necessary state change-of-control approvals required to close the transaction.

"We continue to cooperate with the Department of Justice as we move toward a combined organization," he said.

Shares of Aetna, inactive premarket, have added 15% over the past three months.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

April 28, 2016 07:02 ET (11:02 GMT)

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