(Reuters) — Aetna Inc. on Thursday reported a better-than-expected first quarter, helped by a surge in profits from its commercial business and by adding new customers.
New customers were sourced partly from employers and partly from insurance exchanges created under President Barack Obama's signature health care law.
It raised its forecast for 2014 profit, saying it expected to end the year with an additional 800,000 to 1 million customers, with a total of more than 23 million people and $56 billion to $57 billion in operating revenues.
"Improvements appear to span the entire company, with limited health reform impact," Stifel analyst Thomas Carroll said in a research note.
The third-largest U.S. health insurer's quarterly operating profit grew to $1.98 per share as the percentage it spent on claims declined in its commercial business. Severe winter weather slowed medical services use, which kept claims and costs down, and a moderate flu season helped, it said.
Aetna also said it had raised health plan premiums as it sought to recover Affordable Care Act-related taxes and fees in its revenues. Those taxes include an overall insurance fee that is used to help fund the exchanges, which began providing coverage on Jan. 1.
Revenue rose to $14 billion from $9.54 billion in the year earlier quarter.
Aetna has one of the largest total memberships on these exchanges, behind WellPoint Inc., and offers plans in 17 states. Its better-than-expected quarter and raised outlook for 2014 growth comes one week after UnitedHealth Inc , which has only a small role on the exchanges, issued a conservative view for the year that brought sector shares down.
Analysts on average had expected earnings of $1.55 per share, according to Thomson Reuters I/B/E/S. That figure excludes items such as acquisition costs for the purchase of Coventry last year, which also helped profit.
The company reported net income of $665.5 million, or $1.82 per share, up from $490.1 million, or $1.48 per share, a year earlier.
Aetna said it had 22.72 million medical customers at the end of March, up from 22.19 million at the end of December and 18.3 million at the end of March 2013.
The company's commercial business grew by 405,000 during the first quarter, which includes new customers on the exchanges and also from its employer-based business.
For 2014, it expects earnings of $6.35 to $6.55 per share, up from a previous forecast of at least $6.25 per share.
The company cautioned it had signed up more new exchange members than expected and was not certain of their medical costs. Previously the company has said it expects to lose money on this new business as some of the previously uninsured may bear higher health costs.