Aetna's 2017 revenue and profit stumble
Health insurer Aetna posted lower revenue in its fourth-quarter and full-year 2017 results as decreased premiums and fewer members in its Affordable Care Act individual and small group plans held down the top line.
Meanwhile, Hartford, Conn.-based Aetna's fourth-quarter profit jumped thanks to lower transaction and integration costs related to its proposed merger with Humana, which the insurers called off in February 2017. But its full-year profit fell thanks to costs related to terminating that same deal.
Aetna is now focused on sealing its $69 billion deal with pharmacy giant CVS Health. The two expect the deal, which will make Aetna a stand-alone unit within CVS, to close in the second half of 2018 after gaining regulatory approval.
Aetna said it also expects to increase its gross adjusted earnings for 2018 by about $800 million thanks to the GOP tax overhaul.
"Aetna's strong 2017 results demonstrate the power and versatility of our core businesses," Mark Bertolini, Aetna chairman and CEO, said in a statement. "As we progress toward completing our pending transaction with CVS Health, we remain focused on serving our members and delivering on our strategic and financial objectives."
Because of its pending deal with CVS, Aetna is not holding a conference call with investors to discuss 2017 financial results.
Aetna's revenue for the fourth quarter was $14.9 billion, down 5.6% over the same period in 2016. Its full-year revenue dipped by 4.2% to $60.5 billion. Aetna blamed the lower revenue on decreased premiums and ACA-compliant membership, as well as the temporary suspension of the health insurer fee in 2017 (since premiums were lower without the fee).
Aetna also said the November sale of its group life insurance, group disability insurance and absence management businesses to property-casualty insurer the Hartford for $1.45 billion contributed to the lower revenue.
Healthcare premium revenue dipped by 4.6% to $12.9 billion in the fourth quarter and by 3.9% to $52 billion for the full year.
Aetna's commercial membership fell by almost 500,000 members to 18.1 million at the close of 2017 compared with 2016. It also lost roughly 550,000 Medicaid members in 2017, bringing its total Medicaid membership to 1.9 million at year-end.
Meanwhile, Aetna increased membership in Medicare Advantage and Medicare supplement plans. Its Advantage membership totaled nearly 1.47 million members in 2017, up 8.1% year over year. Membership in its Medicare supplement plans rose by 8% to 740,000. Aetna's membership totaled 22.2 million in 2017, about 3.8% lower than its 2016 membership.
Profit jumped to $244 million in the fourth quarter of 2017, compared with $139 million in the same period in 2016, as the insurer spent fewer dollars on restructuring and transaction and integration-related costs after calling off its proposed merger with Humana.
At the same time, costs related to ending that merger caused Aetna's full-year profit to drop 17.4% to $1.9 billion. Aetna was required to pay Humana a $1 billion breakup fee, or about $630 million after taxes. The two insurers called off their proposed marriage after a federal court blocked the merger on anti-competitive grounds.
The fourth-quarter medical loss ratio, which represents the amount of premiums spent on healthcare claims and quality improvement, was 84.3%, compared with 82.1% in the fourth quarter of 2016. For the full year, Aetna's ratio was 82.2%, up from 81.8% in 2016.
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