Aetna's third-quarter net income rose 4 percent, fueled in part by enrollment and revenue gains from a multi-billion-dollar acquisition the health insurer completed earlier this year.
But the Hartford, Conn., company's expenses also jumped, and it became the second big health insurer to miss Wall Street expectations for the quarter. Aetna shares slipped Tuesday in premarket trading.
Aetna's health care costs — its largest expense — climbed 57 percent in the quarter, which partially countered a 46 percent gain in total revenue. The company said a poor performance from two products and federal budget cuts hurt its Medicare business, which mostly involves privately run versions of the government's coverage program for the elderly and disabled people.
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Aetna also booked $51.2 million in expenses before taxes tied to its acquisition of Medicare and Medicaid coverage provider Coventry Health Care. The insurer closed that $6.9 billion deal in May.
Overall, Aetna Inc. said Tuesday that it earned $518.6 million, or $1.38 per share, in the three months that ended Sept. 30. That is up from $499.2 million, or $1.47 per share, a year ago, when Aetna had fewer shares outstanding.
Excluding items like integration costs, adjusted earnings totaled $1.50 per share. Total revenue jumped to $13.04 billion from $8.92 billion.
Analysts forecast higher earnings of $1.52 per share on about $12.87 billion in revenue, according to FactSet.
Medical enrollment climbed 22 percent to more than 22 million people, compared to last year, helped in part by the Coventry deal.
Aetna also reaffirmed its forecast for 2013 adjusted earnings that will range between $5.80 and $5.90 per share. The insurer started 2013 expecting adjusted earnings of at least $5.40 per share and has since raised that forecast three times.
Analysts expect, on average, $5.90 per share.
Aetna is the nation's third largest health insurer based on enrollment, trailing only WellPoint and UnitedHealth. It also sells dental, group life and disability coverage.
Health insurance stocks have been hot targets for investors this year, helped in part by their strong performances, but the shares have stumbled a bit this month.
UnitedHealth, the nation's largest insurer, reported a rare miss of analyst expectations in the third quarter and said Medicare Advantage funding cuts continue to pressure its business. WellPoint, the second-largest insurer, beat expectations, but its earnings fell 5 percent, and the insurer said last week that it was raising its forecast despite added expenses from the federal health care overhaul, which aims to expand insurance coverage to millions of people.
Aetna shares fell 28 cents to $61.50 Tuesday in premarket trading about 90 minutes before the market opening. The stock has climbed about 33 percent so far this year.
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