Aetna's Q1 earnings dive 13% with higher claims costs

Aetna's first quarter revenue plunged 13 percent--its largest drop in almost three years--because of high claims and administrative costs.

The third largest health insurer said Thursday that it made $511 million, or $1.43 per share, in first-quarter net income, compared to $586 million, or $1.50 per share, a year ago. Revenue climbed 6 percent to $8.86 billion, according to Reuters.

Aetna's largest expense came from medical claims that rose more than 9 percent to $5.86 billion. It spent 81.5 percent of premiums on member care, an increase from 79.2 percent last year, Bloomberg reported.

Membership also fell, with enrollment dropping 3 percent to 17.9 million in the first quarter. However, Aetna CEO Mark Bertolini said the company is confident it will raise membership to 18.2 million total members, some of which is expected from its expanding Medicaid business in Ohio and Missouri, the Associated Press reported.

Aetna spokeswoman Cynthia Michener tried to downplay the results. "A year ago, and actually throughout last year, our estimates were high in hindsight given actual claim activity and costs," she said. "We've been saying for the past couple of quarters that we expected 2012 to come in more normally, and we set aside the appropriate money to pay claims."

Bertolini also told analysts that Americans' decreased use of medical services amid the weak economy--a major factor in helping boost insurers' earnings last year--may be coming to an end, Bloomberg noted.

To learn more:
- read the Associated Press article
- check out the Bloomberg article
- see the Reuters article