Aetna Inc. (NYSE: AET) reported a weak revenues performance which lost over 3% yoy to $15,523 million in the second quarter of 2017. On the other hand, the group reported a solid bottom line with net income rising 52% to $1.2 billion, or $3.60 per share during the quarter as compared to the prior corresponding period. Adjusted earnings for second-quarter 2017 rose 46% yoy to $1.1 billion, or $3.42 per share during the period against prior corresponding period. As a result, the stock rallied over 1.7% on August 3rd, 2017 (As of 12:52PM EDT; Source: Google finance). Aetna stock rallied over 30.7% in the last six months. But the stock has a target price of $163.42, which is a limited 4% upside.
Health Care segment delivered a weak performance, wherein the total revenue decreased to $14.8 billion during second-quarter of 2017 hurt by the decrease in membership in Aetna’s ACA compliant individual and small group products as well as temporary suspension of the HIF in 2017. But better premium yields in Aetna’s Commercial and Government businesses and membership growth in Aetna’s Medicare products slightly offset the weakness. Medical membership lost 358 thousand as at June 30, 2017 on the back of fall in Aetna’s Medicaid products on the back of the exit of the Missouri Medicaid program during second-quarter 2017. The group’s Commercial MBR declined on the back of better performance across their core Commercial business. Government MBR was flat against the prior corresponding period on the back of better performance in Aetna’s Government business, which offset the unfavorable impact of the temporary suspension of the HIF in 2017. Group Insurance segment revenue also fell to $642 million during the quarter as compared to $647 million in the prior corresponding period.
On the other hand, the total company expense ratio improved to 16.4% during the second quarters of 2017 from 17.5 percent in the prior corresponding period. This improvement is on the back of the temporary suspension of the HIF in 2017 and Aetna’s expense management initiatives.
For the full year of 2017, the group expects a GAAP in the range of $5.46 to $5.56 while Non-GAAP is forecasted to be in the range of $9.45 to $9.55.