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Aetna Well Poised But for Public Exchange, Regulator Worries
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On Aug 8, we issued an updated research report on the health insurer Aetna Inc. . Last week, the company announced impressive second-quarter results. It reported earnings of $2.21 per share, which easily surpassed the Zacks Consensus Estimate of $2.11 and grew 8% year over year.
The upside was primarily driven by higher fees and other revenue in Aetna's Health Care segment, and lower general and administrative expenses, partly offset by lower underwriting margins at Health Care.
Performance of Aetna’s Government business continues to be strong, led primarily by the 2013 acquisition of Coventry. Revenues from this business have been consistently growing over the past several quarters.
Also, its international business offers diversification benefits. Recent cost reduction initiatives undertaken by the company have been paying off well, as witnessed by the adjusted expense ratio, which declined throughout the first half of 2016 on a year-over-year basis.
While most of the company’s businesses are doing well, Aetna is in troubled waters with the regulators at the Department of Justice suing the company for its proposed merger with Humana Inc. (HUM - Free Report) . The merger, which could have lifted the ranks of Aetna as a major Medicare provider, a market coveted by all the players in the industry, is now clouded with uncertainty. Aetna is, however, determined to brave the odds. The company is in the process of divesting Medicare Advantage plans that cover 290,000 people in 21 states to Molina Healthcare, Inc. (MOH - Free Report) in an effort to win approval for the deal.
Another major concern voiced by the company during the latest earnings release was its disappointment with the public exchanges. Although earlier, the company had been sanguine about its business on public exchanges and had plans to expand its presence, Aetna is now evaluating the viability of these markets and may even decide to exit the loss generating ones. To this end, Aetna is now ceasing expansion of offerings in new states for 2017, thereby curtailing the sale of ACA plans on the public exchanges. Similarly, another major player in the same space, UnitedHealth Group Inc. (UNH - Free Report) is disappointed with public exchanges and has announced its exit from several markets.
Aetna carries a Zacks Rank #3 (Hold).
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Aetna Well Poised But for Public Exchange, Regulator Worries
On Aug 8, we issued an updated research report on the health insurer Aetna Inc. . Last week, the company announced impressive second-quarter results. It reported earnings of $2.21 per share, which easily surpassed the Zacks Consensus Estimate of $2.11 and grew 8% year over year.
The upside was primarily driven by higher fees and other revenue in Aetna's Health Care segment, and lower general and administrative expenses, partly offset by lower underwriting margins at Health Care.
Performance of Aetna’s Government business continues to be strong, led primarily by the 2013 acquisition of Coventry. Revenues from this business have been consistently growing over the past several quarters.
Also, its international business offers diversification benefits. Recent cost reduction initiatives undertaken by the company have been paying off well, as witnessed by the adjusted expense ratio, which declined throughout the first half of 2016 on a year-over-year basis.
AETNA INC-NEW Price and Consensus
AETNA INC-NEW Price and Consensus | AETNA INC-NEW Quote
While most of the company’s businesses are doing well, Aetna is in troubled waters with the regulators at the Department of Justice suing the company for its proposed merger with Humana Inc. (HUM - Free Report) . The merger, which could have lifted the ranks of Aetna as a major Medicare provider, a market coveted by all the players in the industry, is now clouded with uncertainty. Aetna is, however, determined to brave the odds. The company is in the process of divesting Medicare Advantage plans that cover 290,000 people in 21 states to Molina Healthcare, Inc. (MOH - Free Report) in an effort to win approval for the deal.
Another major concern voiced by the company during the latest earnings release was its disappointment with the public exchanges. Although earlier, the company had been sanguine about its business on public exchanges and had plans to expand its presence, Aetna is now evaluating the viability of these markets and may even decide to exit the loss generating ones. To this end, Aetna is now ceasing expansion of offerings in new states for 2017, thereby curtailing the sale of ACA plans on the public exchanges. Similarly, another major player in the same space, UnitedHealth Group Inc. (UNH - Free Report) is disappointed with public exchanges and has announced its exit from several markets.
Aetna carries a Zacks Rank #3 (Hold).
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