Feb 1, 8:26 AM EST

Aetna's fourth-quarter earnings surged 38 percent in a performance that trumped analyst estimates, but the health insurer issued initial guidance for the new year that fell short of Wall Street expectations


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Aetna wrapped up 2015 with a 38-percent surge in fourth quarter earnings but chased that better-than-expected performance with 2016 guidance that misses Wall Street forecasts.

The nation's third largest health insurer said Monday it expects adjusted earnings of at least $7.75 per share in the new year. Analysts had been looking for per-share earnings $8.05, according to a poll by the data firm FactSet.

Aetna recorded adjusted earnings of $7.71 per share in 2015. The insurer said its initial, 2016 guidance factors in an expected first-quarter drop in commercial health insurance enrollment and an anticipated modest rise in medical cost trends, among other factors.

The company also said it expects an improved performance in 2016 from business tied to Affordable Care Act. Aetna and other insurers have struggled with business they've received from the ACA's public insurance exchanges, which offer income-based subsidies to help millions buy coverage. The insurer has lost money on its exchange business, but Chairman and CEO Mark Bertolini also has said it's too early to give up on what is a relatively small part of its portfolio.

The 2016 forecast likely will not surprise investors, according to Goldman Sachs analyst Matthew Borsch. He said in a research note that Aetna, like other insurers, starts its forecasts conservatively and does not factor in gains the company will record due to leftover insurance claims.

Aetna also said Monday that it still expects to close its roughly $35 billion acquisition of Medicare Advantage coverage provider Humana in the second half of the year. Bertolini said in a statement from the company that Aetna has been working diligently with federal and state regulators on a final approval.

Aetna's deal and competitor Anthem's pending acquisition of Cigna Corp. have stoked worry about competition in insurance markets, but Aetna executives have said its business largely complements Humana's.

Wedbush analyst Sarah James said in a research note that she is growing increasingly confident that the deal will close in the second half of the year.

In the final quarter of 2015, Aetna earned $320.8 million. That compares with a $232 million profit recorded in the final quarter of 2014, when it also booked an $89.3 million charge from paying off debt early.

Adjusted earnings totaled $1.37 per share while operating revenue, which excludes which excludes investment gains, climbed 2 percent to $15.1 billion.

Analysts forecast, on average, earnings of $1.20 per share on $14.94 billion in revenue, according to Zacks Investment Research.

Health insurance is Aetna's main product, and most of its enrollment comes from commercial coverage sold through employers or directly to individuals. But the insurer and its competitors have been growing their stakes in the government funded Medicare and Medicaid programs.

Aetna cited growth in government programs as a factor behind its improvement in the quarter.

The insurer's medical enrollment came in nearly flat, compared to the final quarter of 2014, at about 23.5 million.

Shares of the Hartford, Connecticut, company climbed $1.16 to $103 before markets opened. The stock had fallen roughly 6 percent since the beginning of the year, while the Standard & Poor's 500 index has decreased 5 percent.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on AET at http://www.zacks.com/ap/AET

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Keywords: Aetna, Earnings Report, Priority Earnings

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