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Healthcare biz boosts Aetna's operating earnings in Q4'16

Aetna Inc. reported fourth-quarter 2016 operating earnings of $578 million, or $1.63 per share, up from $482 million, or $1.37 per share, in the prior-year quarter.

Higher underwriting margins and higher fees and other revenue in Aetna's healthcare segment contributed to the year-over-year increase in operating earnings.

The S&P Capital IQ consensus normalized EPS estimate for the fourth quarter of 2016 was $1.44.

Fourth-quarter 2016 GAAP net income was $139 million, or 39 cents per share, down from $321 million, or 91 cents per share, in the year-ago quarter. The decline was primarily attributed to an increase in restructuring costs, which include a $215 million, or $330 million pretax, of expense recorded during the fourth quarter of 2016 related to the company's voluntary early retirement program, partially offset by the increase in operating earnings.

Total revenue stood at $15.73 billion in the fourth quarter of 2016, up from $15.05 billion in the prior-year quarter. Fourth-quarter 2016 operating revenue also rose year over year to $15.72 billion from $15.09 billion. The increase in both total revenue and operating revenue was primarily due to higher premiums in the healthcare segment.

"We closed 2016 with a solid quarter driven by outperformance across multiple businesses, which offset continued pressure from our individual commercial [Affordable Care Act-compliant] products," Aetna Executive Vice President and CFO Shawn Guertin said in a news release.

The total medical benefit ratio for the fourth quarter of 2016 was 82.1%, compared with 81.9% in the fourth quarter of 2015. Aetna's fourth-quarter 2016 commercial medical benefit ratio increased year over year to 83.0% in the fourth quarter of 2016 from 81.3% primarily due to higher medical costs in Aetna's individual commercial products. Its fourth-quarter 2016 government medical benefit ratio declined to 81.2% from 82.6% year over year due to higher favorable development of prior-period healthcare cost estimates in 2016 in its Medicare products.

Medical membership totaled 23.1 million at the end of the fourth quarter of 2016, compared with 23.5 million at the end of the fourth quarter of 2015.

For 2016, Aetna posted operating earnings of $2.92 billion, or $8.23 per share, up from $2.72 billion, or $7.71 per share, in 2015. The increase was primarily due to higher fees and other revenue in the healthcare segment.

The S&P Capital IQ consensus normalized EPS estimate for 2016 was $8.02.

For 2017, the company expects to report operating EPS of at least $8.55.

The S&P Capital IQ consensus normalized EPS estimate for 2017 is $8.79.

The health insurer projects 2017 GAAP EPS to be at least $3.70.

Aetna said it continues to weigh its options for responding to a trial court's ruling against the pending deal for Humana Inc. The 2017 guidance assumes the termination of Aetna's merger agreement with Humana and Aetna's asset purchase agreement with Molina Healthcare Inc.