Aetna's Q2 profits beat estimates, though revenue dips

Aetna raised its full-year earnings projection to between $9.45 and $9.55 per share, well above its previous estimate of $8.80 to $9.

Aetna’s second-quarter profits soundly beat analysts’ expectations and led the insurer to raise its full-year outlook—though its revenue also dipped.

The insurer reported Thursday that its net income for the quarter totaled $1.2 billion, or $3.60 per share, up from $791 million in the second quarter of 2016. Its adjusted earnings were $1.1 billion, or $3.42 per share, beating the consensus estimate of $2.37 by 44%. Aetna raised its full-year earnings projection to between $9.45 and $9.55 per share, well above its previous estimate of $8.80 to $9.

Aetna’s quarterly revenue of $15.5 billion was slightly lower than the $16 billion it reported in the second quarter of 2016, primarily because of lower membership in the insurer’s Affordable Care Act exchange business. Its total medical membership in the quarter was 22.1 million.

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Aetna has significantly pared back its presence in the individual market, and it currently offers exchange plans in just four states. That footprint is set to shrink to just three states next year, though after reporting a first-quarter loss earlier this year, Aetna executives said it could pull back even further.

RELATED: Aetna's Mark Bertolini: Individual markets in 'death spiral'

But while it is largely retreating from the ACA exchanges, Aetna plans to expand in the Medicare sector. The insurer, which currently serves 56% of the Medicare population, submitted bids in June to expand its reach to 60% in 2018, CEO Mark Bertolini said on a call with investors.

The insurer’s Medicare business performed well in the second quarter, he said, and “remains a critical component of our enterprise growth trajectory.” Already, Aetna’s Medicare membership has grown 14% year over year, almost one-third of which is due to its geographic expansion in 2017.

In its Medicaid book of business, Aetna delivered “another solid quarter” in terms of revenue and underwriting results, despite an expected membership reduction due to its exit from the Missouri Medicaid program.

Aetna also plans to terminate its recently launched Nevada Medicaid contract, Bertolini said, a move he attributed to “receiving an insufficient level of membership to achieve a long-term viable presence” in the state.

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