Aetna recorded more than $2 billion in profit in fiscal 2014, the highest level in the company’s history and a signal that healthcare reform continues to treat the health insurance industry well.
The Hartford, Conn.-based insurer also raised its 2015 earnings per share projection to “at least” $7, up from the company’s $6.90 prediction in December. Most analysts are even more optimistic, forecasting earnings per share this year of $7.14. Ana Gupte, a managing director at Leerink Partners, said it could be as high as $7.30.
Aetna’s net income was down 37% in the fourth quarter. But the insurer’s total 2014 profit topped $2 billion, 6.6% higher than the $1.9 billion recorded in 2013. Earnings per share on the year were $6.70 compared with $6.24 in 2013.
Revenue in the fourth quarter reached $14.8 billion, which was above many analysts’ estimates. Full-year revenue surpassed the $58 billion mark, a 23% increase from 2013.
Aetna’s financial success stemmed from low medical-cost trends, its acquisition of Coventry Health Care several years ago and major growth in its Medicare and Medicaid plans, financial documents show.
Aetna’s total medical-loss ratio—which shows how much the company paid for healthcare services from premium revenue—was 83% in the fourth quarter, down from 83.9% in the same period of 2013. The company’s medical-loss ratio was 82.2% on the year compared with 82.9% in 2013.
Aetna is selling public exchange health plans in 18 states this year, one more than in 2014. The company ended 2014 with 560,000 exchange members and expects to have 800,000 members by the end of the first quarter this year. The exchanges were created under the Patient Protection and Affordable Care Act, and open enrollment for this year ends Feb. 15.
“We believe these strong results validate our strategy of focusing on geographies where we have a competitive cost structure and could provide the greatest value to potential customers,” Aetna CEO Mark Bertolini said on a Tuesday call with investors.
More than 23.5 million people had some type of Aetna health plan as of Dec. 31, the company reported. Bertolini expressed confidence that Aetna would continue to grow this year and that the Affordable Care Act would be an important stimulant.
“The insurance industry didn't die,” Bertolini said at the J.P. Morgan Healthcare Conference in January. Reform “has only made us stronger,” he said.
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