On Sep 16, we issued an updated research report on the U.S. health insurer Aetna Inc. (AET). The insurer churned out second-quarter earnings of $1.69 per share, zooming past the Zacks Consensus Estimate of $1.61. Earnings also grew 4% year over year. Aetna’s better-than-expected earnings came on the back of higher underwriting margins in the Health Care business and accretion from the Coventry acquisition.
Aetna is among the top five health insurers in the U.S. wherein the first rank is held by UnitedHealth Group Inc. (UNH). Regardless of facing significant business challenges and uncertainties in 2014, Aetna did not fail to post strong earnings. The company’s average positive surprise over the trailing four quarters has been 7.3%
Aetna has taken several measures both organic as well as inorganic to grow its business. The acquisition of Coventry has significantly improved its market position in both the commercial and government markets.
The insurer is also actively working on its ACO strategy, to manage medical cost.
The health insurer has been successfully increasing its membership. The second quarter of 2014 marked its ninth sequential quarter of medical membership growth.
Aetna is well poised to grow its public exchange business. At the end of second quarter 2014, Aetna had 600,000 paid public exchange members. For 2015, the company will expand its footprint and enter into the state of Georgia.
Other factors such as expanding international business and a strong capital position make it a favored stock among investors.
Nevertheless, hindrance to premium rate increases, medicare rate pressure and increasing medical cost are some of the headwinds facing the company over the next several quarters.
Other Stocks
Aetna carries a Zacks Rank # 3 (Hold). Better-ranked stocks from the industry include Triple-S Management Corporation (GTS) and Centene Corp. (CNC). While Triple-S Management carries a Zacks Rank # 1 (Strong Buy), Centene carries a Zacks Rank # 2 (Buy).
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