Aetna Inc.'s second-quarter net income tumbled almost 15 percent compared with last year, when the health insurer caught a big break from lower-than-expected leftover claims. But the latest results still beat analyst expectations, and Aetna raised its 2012 earnings forecast.The higher outlook, announced Tuesday, comes a day after competitor Humana Inc. joined another insurer, WellPoint Inc., in cutting its 2012 earnings forecast after reporting second-quarter results. Those insurers pointed in part to concern over rising medical costs.
Health insurers were helped last year by health care use that grew slower than they expected when they set their premiums. Aetna said Tuesday that medical costs _ which are affected by use and price increases for care _ will rise at a faster clip in 2012 than they did last year, but the growth still falls within the range the insurer expected and below rates seen before the recession.
Industry observers say people tend to rein in their health care expenses for several quarters or even a few years following a tough recession. That can affect the medical costs insurers face.
Aetna joined UnitedHealth Group Inc., the nation's largest insurer, in raising its 2012 forecast after reporting second-quarter earnings. Aetna said Tuesday that it now expects 2012 adjusted earnings, which exclude one-time items, to range between $5 and $5.10 per share. That's up from its previous forecast of $5 per share. Analysts surveyed by FactSet expect, on average, earnings of $5.04 per share.
In the second quarter, Aetna's net income fell to $457.6 million, or $1.32 per share. That's down from $536.7 million, or $1.39 per share, a year ago. Adjusted earnings, which exclude one-time items, were $1.31 per share. That topped the $1.25 per share that analysts expected.
Revenue rose 6 percent to $8.84 billion, also above analyst expectations of $8.75 billion.
Aetna's performance in last year's quarter was helped by a $188 million pretax gain recorded because claims left over from previous quarters came in lower than expected. That allowed the insurer to release money it had held in reserve. In the latest quarter, Aetna saw a smaller, $38-million gain due to leftover claims.
Excluding the after-tax impact of these gains, the insurer's earnings climbed 7 percent.
Aetna's health care costs, or the amount it paid in medical claims, rose 10 percent from to $5.91 billion. Chief Financial Officer Joe Zubretsky attributed that largely to the difference in leftover claims compared with last year.