(Story updated at 2 p.m. ET.)
Aetna beat earnings estimates and recorded $777.5 million of profit in the first quarter of this year, prompting the Hartford, Conn.-based health insurer to raise profit predictions for the rest of the year.
Aetna's overall medical-loss ratio declined year over year, from 80.4% to 79.1%. That shows Aetna paid about 79 cents in medical claims for every premium dollar it collected. Utilization of healthcare services did not increase as much as economists or insurance executives have predicted, and Aetna said it was able to build higher profits into its commercial and Medicare and Medicaid health plans.
The $777.5 million in profit was a 17% increase from the same period last year. Aetna's revenue increased 8% in the quarter to $15.1 billion. Operating earnings per share totaled $2.39 in the first quarter and is now expected to be between $7.20 and $7.40 for the year, up from the earlier estimate of "at least" $7 per share, Aetna CEO Mark Bertolini said in a news release.
Aetna's profit in 2014 topped $2 billion, while revenue exceeded $58 billion. Executives said they expect to end 2015 with $62 billion of revenue.
Approximately 23.7 million people had some form of Aetna health coverage as of March 31. Aetna is the fourth-largest Medicare Advantage insurer in the country with 1.23 million covered seniors, a 12% increase from last year. Medicare supplemental plans, called Medigap plans, increased 17% year over year.
Aetna said almost 19.9 million people had commercial and employer-based health plans, and 4 million of that total were enrolled in high-deductible plans—referred to as "consumer-directed health plans." Roughly 3.5 million members were enrolled in an Aetna high-deductible plan in the prior-year period.
More than 950,000 people bought an Aetna health plan through an Affordable Care Act exchange by the end of the first quarter, Bertolini said on an investor call Tuesday. That exceeded the company's initial projection of 800,000. Aetna sells exchange plans in 17 states.
“We saw both market growth and taking business from competitors,” Aetna President Karen Rohan said on the call, noting that half of the exchange members are new. “It's a very competitive price market.”
When asked about large-scale mergers and acquisitions, Aetna executives reiterated what they have said in previous quarters: They would be ready to make a move should something happen in the industry. “We have a strong balance sheet, and we are paying attention to what's going on in the marketplace and will react appropriately or act appropriately should the opportunity arise,” Aetna Chief Financial Officer Shawn Guertin said.
At the J.P. Morgan Healthcare Conference in San Francisco in January, Bertolini said the second quarter of this year will be an “important” time to monitor M&A among health insurers.
Aetna's record-level earnings and revenue provide further evidence that health insurers continue to win in the ACA era, as the law pushes previously uninsured people into private coverage through exchanges and Medicaid managed care. UnitedHealth Group reported a similarly profitable first quarter two weeks ago.