Aetna earnings fall short

(Bloomberg) — Aetna Inc., the third-biggest U.S. insurer, reported earnings that missed analyst estimates as Medicare costs were higher than expected.

Fourth-quarter earnings excluding one-time items of $1.34 a share missed by 2 cents the average of 14 analyst estimates compiled by Bloomberg. Net income almost doubled to $368.9 million, or $1 a share, from $190.1 million, or 56 cents, a year earlier, Hartford, Conn.-based Aetna said in a statement today. 

Medicare costs as a percentage of premiums, known as medical-loss ratio, rose to 87.9 percent from 85.6 percent a year earlier, in part because of “underperformance in two specific Medicare product offerings,” Aetna said. In July, Chief Financial Officer Shawn Guertin said the company was experiencing higher-than-anticipated costs in products including individual Medicare Advantage offerings.

The Medicare medical-loss ratio “has been pretty bad throughout the year,” said Ana Gupte, a New York-based analyst at Leerink Partners in a telephone interview today. Even so, the ratio was still worse than estimated, analysts Justin Lake of JPMorgan Securities Inc. and Chris Rigg of Susquehanna Intl Group LLP said in notes today.

Aetna rose less than 1 percent to $68.45 at 8:35 a.m. New York time. The company had gained 38 percent in the last 12 months.

Operating revenue in the fourth quarter rose to $13.13 billion, less than analysts’ expectations of $13.15 billion.