Aetna's second-quarter earnings jumped 33 percent and the health insurer raised its 2015 forecast again after receiving a boost from a government business it plans to feed with a roughly $35 billion acquisition.
Aetna said Thursday that it gained members in both its Medicare and Medicaid businesses, and higher underwriting margins or improved profitability helped balance a jump in operating costs during the quarter. The nation's third-largest health insurer easily topped Wall Street expectations.
The company also raised its 2015 forecast for the third time. It now expects full-year operating earnings of at least $7.40 per share. That's up from a range of $7.20 to $7.40 that it predicted this spring.
Analysts expect, on average, earnings of $7.42 per share, according to FactSet.
For the second quarter, Aetna brought in $731.8 million, with adjusted results totaling $2.05 per share.
Analysts expected, on average, $1.84 per share, according to Zacks Investment Research.
Operating revenue climbed 4 percent to $15.1 billion, which fell short of average analyst expectations for $15.43 billion.
Health insurance is Aetna's main product, and most of its enrollment comes from commercial coverage sold through employers or directly to individuals. But the insurer said Tuesday that enrollment in its Medicare coverage jumped more than 12 percent to 1.7 million people compared with last year's quarter.
That includes supplemental policies for people on Medicare and privately run versions of the government's coverage program for people who are over 65 or disabled.
"We continue to believe that Medicare is one of the most attractive growth opportunities for our company and our industry," Chairman and CEO Mark Bertolini told analysts during a conference call to discuss results.
Insurers like Aetna and the Blue Cross-Blue Shield carrier Anthem have been pushing to expand their government business as the baby boomer generation ages and becomes eligible for Medicare coverage and as the federal health care overhaul makes more people eligible for the state-and-federally funded Medicaid program.
Aetna stoked its government growth a couple years ago when it completed a $6.9 billion acquisition of fellow insurer Coventry Health Care. It plans to further juice that business with a pending acquisition of Humana Inc., the nation's second-largest provider of Medicare Advantage plans.
Bertolini said Tuesday that the Humana deal will expand his company's geographic footprint to cover about 90 percent of the country's Medicare-eligible population.
That deal, announced last month, is part of a buyout flurry in the managed care sector, a major push for growth that will transform the five biggest health insurers into just three. Anthem also plans to pay $48 billion for Cigna Corp.
Insurers say these acquisitions will help them save money and quickly improve their technology, which is becoming more important in monitoring patient health and helping customers find care. The tie-ups also can, in some cases, improve negotiating leverage over care providers, who also have been growing.
Insurers are deal-hungry because they face slowing growth in employer-sponsored coverage, the biggest slice of the health insurance market, and they're adjusting to taxes and coverage restrictions imposed by the federal health care overhaul.
Shares of Aetna climbed 37 cents to $114.16 Tuesday afternoon, after setting a new all-time high price of $117.10 earlier in the session. The stock already hit several all-time high prices so far this year.