Earnings Preview: Aetna reports on 4Q Thursday

Aetna Inc. will become on Thursday the latest big health insurer to report how it wrapped up 2012 and how it expects results to shake out this year, as the industry prepares for the start of expanded coverage and new taxes under the health care overhaul.

WHAT TO WATCH FOR: The health care overhaul takes key steps toward its goal of covering millions of people next year, when the state-federal Medicaid program expands, and people shopping in the individual insurance market or for coverage through a small employer will be able to buy coverage on new online exchanges.

The overhaul also will impose new fees and coverage restrictions on insurers. Aetna competitor WellPoint Inc. has already said it expects to spend about $300 million this year preparing for the coverage expansions and changes.

Most of Aetna's commercial enrollment involves coverage offered through large employers, so its enrollment won't be affected as much as WellPoint's. But investors still will want some insight into how Aetna is preparing for the law.

They also will want updates on how the flu season is shaping up. It stirred worry earlier this month with its rapid spread, but some analysts who cover health insurers say they think the season has already peaked. Aetna Chairman and CEO Mark Bertolini has said he expects the insurer to spend about $40 million to $50 million on claims this season, which is within its normal range.

Aetna and other health insurers have been helped the past several quarters by medical costs that have grown at slower-than-expected rates. Investors will want to know if the insurer saw signs of that picking up in the fourth quarter.

Aetna said last month it planned to take a $78 million charge in the fourth quarter due to the settlement of federal, class-action litigation over reimbursement for claims outside the insurer's network of health care providers.

While the insurer will report on its final quarter for 2012 Thursday, analysts will want more insight into how 2013 is shaping up. Aetna said last month it expects earnings from operations of about $5.40 per share in 2013, which would represent growth from its forecast for 2012 earnings of $5.10 per share.

The company's stock climbed about 16 percent in the fourth quarter to close 2012 at $46.31. That represented a 10 percent gain over 2011.

About a month before the quarter started, Aetna said it would spend $5.7 billion to buy Medicaid and Medicare coverage provider Coventry Health Care.

WHY IT MATTERS: Aetna, based in Hartford, Conn., is the third-largest health insurer, trailing UnitedHealth Group Inc. and WellPoint in enrollment. Aetna provides health insurance for about 18 million people. It also sells dental, group life and disability coverage.

WHAT'S EXPECTED: Analysts surveyed by FactSet expect, on average, earnings of 97 cents per share on $8.89 billion in revenue.

THE 2011 QUARTER: A drop in some key expenses and slower growth in medical use helped Aetna's net income jump 73 percent in the final quarter of 2011. The insurer earned $372.6 million, or $1.02 per share, on $8.57 billion in revenue.