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Aetna : Posts Revenue Decline, Doesn't Comment on CVS Report -- Update

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10/31/2017 | 05:44pm CET
By Anna Wilde Mathews and Allison Prang 

Aetna Inc. reported increased profit but a decline in revenue in its latest quarter as the insurer highlighted moves to reposition its offerings and set itself up for long-term growth.

During a call with analysts to discuss earnings, Aetna executives declined to address a report in The Wall Street Journal that CVS Health Corp. was in discussions to purchase the company for more than $66 billion.

Chief Executive Mark T. Bertolini said the company won't "comment on rumors or speculation." He did, however, say that Aetna aims to announce its plans for the future of its pharmacy-benefit contract with CVS by the middle of next year, and that CVS's agreement to service the new pharmacy-benefit manager being launched by Anthem Inc. is "not a problem for us." The existing Aetna contract with CVS goes through 2022, but Aetna has the ability to opt out at the start of 2020.

Mr. Bertolini also said Aetna is poised to plunge back into sales of short-term health insurance if the Trump administration removes a cap limiting such plans to three months' duration, a move encouraged by a recent executive order.

He said Aetna is "already all over that," and, once regulations come out fleshing out the executive order, "we will be prepared when we have the opportunity to act." But he said Aetna is looking at the short-term plans rather than "skinny" coverage that would fall short of the protections of full health insurance and can create "moral harm," he says. Skinny coverage is a term that is often used to describe products such as indemnity plans, which pay a set amount toward certain medical services such as hospital stays.

Aetna Chief Financial Officer Shawn M. Guertin said in an interview that the company was looking at "limited term products, not limited benefit products."

Mr. Bertolini also played up Aetna's long-term growth trajectory as a stand-alone company, despite several moves that would be blows to its revenue in 2018. Aetna's continued retreat from the Affordable Care Act exchanges, the sale of its life and disability business and some pullbacks in Medicaid will impact revenue next year, the company said.

Aetna said the impact on profits would be less, particularly given the losses on the ACA business, though like other insurers it said earnings next year will take a hit from the expected return of the ACA tax on health plans, which had been suspended.

Looking forward, Mr. Bertolini emphasized Aetna's growth in Medicare, including its performance in the federal program's quality rankings, and investments Aetna is making in data analytics. Aetna also said it is looking for growth in Medicaid over the long term.

Though Mr. Bertolini didn't discuss CVS, he did talk about efforts to get closer to consumers providing care in settings cheaper than a hospital and helping them avoid emergency-room visit and other costly care.

He said Aetna didn't need to own health-care providers and services. In a previous earnings call, he had discussed CVS's drugstores as one pathway to providing contact and support for consumers.

Aetna has announced it is exiting the ACA exchanges next year, but Mr. Bertolini said that if the business "gets right and stable, we'll look at reconsidering on how we get in."

Aetna on Tuesday again raised its profit forecast for 2017, predicting adjusted earnings per share of $9.75. The company previously estimated per-share earnings between $9.45 and $9.55.

Total adjusted revenue at Aetna fell 5% to $14.95 billion as fewer people were on the company's ACA plans and from the temporary suspension of the ACA health-insurance tax. Analysts were expecting revenue of $15.13 billion. The company had predicted individual ACA plans would lose over $200 million in 2017.

Aetna reported net income of $838 million for the third quarter, up 39% from a year ago. On an adjusted basis, net income rose 11% to $814 million. Adjusted earnings per share rose to $2.45, beating analysts' estimates of $2.09 a share. In the prior-year quarter, Aetna earned $2.07 on an adjusted per-share basis.

Write to Anna Wilde Mathews at [email protected] and Allison Prang at [email protected]

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Financials ($)
Sales 2017 60 653 M
EBIT 2017 4 641 M
Net income 2017 2 349 M
Debt 2017 -
Yield 2017 0,91%
P/E ratio 2017 25,37
P/E ratio 2018 18,29
Capi. / Sales 2017 1,00x
Capi. / Sales 2018 1,00x
Capitalization 60 488 M
Duration : Period :
Aetna Technical Analysis Chart | AET | US00817Y1082 | 4-Traders
Technical analysis trends AETNA
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 19
Average target price 198 $
Spread / Average Target 6,9%
EPS Revisions
Mark T. Bertolini Chairman & Chief Executive Officer
Karen S. Lynch President
Margaret M. McCarthy Executive Vice President-Operations & Technology
Shawn M. Guertin CFO, Executive VP & Chief Enterprise Risk Officer
Harold L. Paz Chief Medical Officer & Executive Vice President
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