Aetna's second-quarter profit climbed more than 2 percent, as gains from an acquisition helped the health insurer top expectations and raise its 2014 earnings forecast again.
But the Hartford, Connecticut, company's shares slipped Tuesday after it also reported a higher medical cost measurement than analysts expected and a slight performance dip for its health care segment, the biggest part of its business.
The insurer said a better performance from its group life and disability business helped grow earnings in the quarter, as did an additional month of results from Medicare and Medicaid coverage provider Coventry Health Care, which Aetna bought last year for $6.9 billion.
But the health care segment's operating earnings, which exclude investment gains and losses, slipped about 1 percent to $584.3 million. Aetna's medical-loss ratio for its commercial health coverage, which basically measures the percentage of premiums spent on medical care and some other costs, climbed to 80.6 percent from 79.1 percent.
"The headline numbers looked fine, but a deeper look into second quarter results is less flattering," Citi analyst Carl McDonald said in a research note.
Overall, earnings for the nation's third-largest health insurer climbed to $548.8 million, or $1.52 per share, from $536 million, or $1.49 per share, in last year's quarter.
Adjusted earnings came to $1.69 per share. That topped average analyst expectations of $1.61 per share, according to Zacks Investment Research.
Aetna's operating revenue, which also excludes investment gains and losses, climbed 25 percent to $14.5 billion revenue That also beat average Wall Street expectations for $13.97 billion.
The insurer's enrollment climbed about 5 percent, compared with last year's second quarter, to top 23 million people. A small part of that gain came from the health care overhaul, the massive law that aims to cover millions of uninsured people.
Aetna Inc. has added about 600,000 people so far this year through the overhaul's public insurance exchanges, which began accepting enrollment last fall and help people find coverage often with help from income-based tax credits.
Aetna participated in 17 individual insurance exchanges, making it one of the largest players in that new market. The company said Tuesday it will only expand into one more, an exchange in Georgia, for coverage that starts in 2015. Competitor UnitedHealth started off much more slowly, participating in only four exchanges this year, but it plans to add as many as 20 for 2015.
Aetna Chief Financial Officer Shawn Guertin said his company plans more measured growth in part because it's still learning about the newly insured population, most of whom only started coverage in April and May.
"We wanted to get substantial experience to learn and to figure out how to serve this population as best we could," he said.
Aetna now expects full-year adjusted earnings to range between $6.45 and $6.60 per share, up from its April forecast of $6.35 to $6.55 per share.
Analysts expect, on average, earnings of $6.50 per share, according to FactSet.
Aetna shares fell nearly 4 percent, or $3.32, to $81.50 in midday trading, while broader indexes were nearly flat. The company's stock had already advanced 24 percent since the start of the year, as of Monday's close, and set several new all-time high prices.