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Health care reform costs, investments nick Aetna profit

Health care reform costs, investments nick Aetna profit

Increased investment spending and health care reform costs reduced Aetna Inc.'s fourth-quarter profits by more than one-third in 2014 compared to prior-year results, even as the company's total revenue grew by 12.1%.

The Hartford, Connecticut-based health insurer recorded $232.0 million in net income for the three months ending Dec. 31, down 37.1% from the fourth quarter of 2013.

Meanwhile, Aetna increased its total fourth-quarter revenue to $14.77 billion in 2014, an increase of 12.1% compared with the final three months of 2013, due primarily to higher investment expenditures, including the acquisitions of InterGlobal Group and Bswift L.L.C. and ongoing integration costs tied to the company's 2012 purchase of Coventry Health Care Inc.

During a conference call with investment analysts on Tuesday, Aetna Chief Financial Officer Shawn Guertin said the increase in total revenue was driven mainly by membership growth in the company's commercial and government health care segments, along with pricing adjustments implemented to mitigate the effects of fees and taxes assessed against health insurance companies under the Patient Protection and Affordable Care Act.

“Our fourth-quarter results demonstrate the execution of Aetna's growth strategy, the success of the Coventry integration and the value of our diversified portfolio,” Mr. Guertin said.

Aetna ended 2014 with 23.5 million enrollees, an increase of 6.1% over enrollment at the end of 2013. Much of that growth was driven by individual enrollments through the state and federal public health insurance exchanges established under the health care reform law.

During the conference call, Aetna Chairman and CEO Mark Bertolini said Aetna had more than 560,000 new enrollments through the exchanges in 2014 and expects to increase its total exchange-based medical enrollments to approximately 800,000 by the end of the first quarter of 2015.

“We're pleased with our first-year execution, particularly in light of the well-publicized challenges of the initial launch of the public exchanges (in the fall of 2013),” Mr. Bertolini said.

Aetna's total year-end revenue grew in 2104 to $58.00 billion, up 22.6% from the previous year. The company also grew its year-end net income to $2.04 billion, a 6.6% rise from 2013.

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