Aetna Inc.'s third-quarter earnings rose 2 percent as lower-than-expected health care use and revenue gains helped the insurer trump Wall Street expectations.
The Hartford, Conn., company recorded a $96 million pretax benefit in the third quarter because claims left over largely from the previous quarter came in lower than expected, which allowed the insurer to release money it had held in reserve. Competitor UnitedHealth Group Inc. reported a similar benefit when it announced earnings last week.
Health insurers have said over the past several quarters that slower-than-expected growth in health care use has helped their performances. The third-quarter benefit recorded by Aetna was smaller than the total from last year's quarter, but it showed that the trend hasn't run its course yet.
Industry observers say people tend to rein in their health care expenses for a few years following a tough recession. That means they put off doctor visits or elective procedures, and that leads to fewer medical claims for insurers.
Aetna Chief Financial Officer Joe Zubretsky said in an interview the insurer saw "incredibly low" health care use in the last two years in particular. Even so, he said the trend has an elastic element to it, and they expect use to bounce back as the economy improves.
"There's no gravitational pull that says it needs to get back there, we just think it's prudent in this very distressed economy to assume that utilization will continue to come back to pre-2009 levels," he said.
Aetna earned $499.2 million, or $1.47 per share, in the three months that ended Sept. 30. That's up from $490.4 million, or $1.30 per share, in last year's quarter. Adjusted earnings totaled $1.55 per share when excluding capital gains and costs tied to early debt payments and Aetna's pending acquisition of Coventry Health Care Inc.
That easily topped the average analyst forecast of $1.33 per share, according to FactSet.
Total revenue climbed 5 percent to $8.92 billion. Analysts expected $8.83 billion.
Aetna's health care premiums rose 7 percent to $7.25 billion in the quarter, and cost cutting helped its performance as operating expenses fell 10 percent.
The insurer said in August that it would spend $5.7 billion to buy Coventry Health Care, a Medicare and Medicaid coverage provider in a deal expected to close in the middle of next year. Aetna recorded in the third quarter a charge of 4 cents per share tied to that deal.
It also recorded a loss of 7 cents per share tied to the early payoff of some long-term debt.
The company's health insurance enrollment slipped less than 1 percent to about 18.2 million people compared to last year's quarter.
Aetna is the third-largest commercial health insurer based on enrollment, trailing WellPoint Inc. and UnitedHealth. Health insurance is Aetna's main product. Much smaller parts of its business offer dental, group life and disability coverage.
Aetna also said Thursday that it now expects 2012 adjusted earnings of about $5.10 per share after previously forecasting earnings of $5 to $5.10 per share. Analysts had expected $5.08 per share.
Zubretsky told analysts Thursday morning that the company expects 2013 earnings per share to grow off of its 2012 projection. He added that they will provide specifics about the forecast at the insurer's investor conference in December.
Company shares climbed 48 cents to close at $44.43 Thursday. Aetna's stock price is up more than 5 percent so far this year.