Health insurer Aetna's 4th quarter profit drops but matches expectations, 2015 forecast climbs

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In this Tuesday, Aug. 19, 2014 photo, a sign for Aetna Inc., is on display at the company headquarters in Hartford, Conn. On Tuesday, Feb. 3, 2015, Aetna reported fourth-quarter profit of $232 million. The results matched Wall Street expectations. (AP Photo/Jessica Hill)


Aetna closed 2014 by matching Wall Street earnings expectations, and the insurer raised its forecast for 2015 thanks in part to a price break it got on some expensive hepatitis C treatments.

The nation's third-largest health insurer said Tuesday that it now expects full-year operating earnings of at least $7 per share, up a dime from its previous forecast.

That is short of average analyst expectations for $7.14 per cents per share, according to FactSet.

But Chief Financial Officer Shawn Guertin told analysts that the new forecast was a floor the company aimed to exceed. He said Aetna raised its expectation for the year because medical enrollment came in higher than projected and it worked out a preferred drug contract covering hepatitis C treatments.

Aetna said last month that it had reached a deal with Gilead Sciences Inc. on discounts for Sovaldi and Harvoni, two ground-breaking treatments for the liver-destroying virus that have list prices of about $84,000 and $94,000, respectively, for a course of treatment. The insurer hasn't detailed the discount.

Insurers have warned for more than a year now about a spike in medical expenses due to a wave of new and pricey specialty drugs like Sovaldi, which debuted in late 2013. Competition has since hit the market for some of these drugs, and drugmakers have started negotiating more on price to preserve their market share.

In the fourth quarter, Aetna's earnings slid 37 percent as it spent more to grow its business. The insurer earned $232 million, or 65 cents per share, down from $368.9 million, or $1 per share, in the final quarter of 2013.

Operating earnings for the most recent quarter totaled $1.22 per share.

That matched the average estimate of analysts surveyed by Zacks Investment Research.

Operating revenue, which excludes investment gains and losses, rose 13 percent to about $14.8 billion. That beat analyst expectations of $14.55 billion.

The insurer saw operating expenses jump 22 percent to $3.07 billion in the quarter as it spent more to build its consumer and government businesses and paid fees tied to the health care overhaul.

In November, Aetna said it would spend $400 million to buy Bswift, a privately held company, as it pushes into the relatively small but growing market for private exchanges. These exchanges let people with employer-sponsored health coverage pick their own plans.

The insurer's enrollment climbed 6 percent to 23.5 million people compared with 2013. Aetna gained about 560,000 members through the overhaul's public insurance exchanges. It participated in 17 individual insurance exchanges in 2014, making it one of the largest players in that new market.

Aetna Inc. shares climbed 92 cents to $93.14 Tuesday morning, while broader trading indexes also rose slightly. Shares of Aetna rose nearly 30 percent last year, hitting several all-time high prices.

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