Aetna acquisition pays off as CVS adds $1B+ to 2Q profits

Photo | CNN Money A CVS storefront.

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By Matt Pilon

Pharmacy giant CVS Health, which bought Hartford-based Aetna in 2018, said company profits increased nearly 54% in the second quarter, an increase of more than $1 billion, thanks mainly to an unprecedented drop in health insurance payments fueled by COVID-19.

CVS reported $2.98 billion in profit, or $2.26 per diluted share, for the quarter ended June 30, up from $1.94 billion, or $1.49, in the same quarter of 2019.

The results beat analyst forecasts compiled by Zacks Investment Research, and CVS increased its full-year guidance to $5.59 to $5.72 per share, up from a prior range of $5.47 to $5.60.

"We're a health innovation company that is built to meet the evolving needs of the millions we serve every day,” CVS Health President and CEO Larry J. Merlo said in a statement. “That's been made clear as we continue to navigate the health, social and economic impacts of COVID-19. Our earnings in this environment demonstrate the strength of our strategy and the power of our diversified business model.”

CVS’ health benefits segment, which includes the Aetna business, saw benefit costs for the quarter fall by more than 10%, from $13.09 billion to $11.75 billion, as the pandemic discouraged patients from going to the doctor and forced hospitals to cancel elective surgeries.

Meanwhile, premium revenue for that segment grew by more than 7%, or $1.1 billion, during the quarter, fueled by membership increases in Medicare and Medicaid products. The gains were partially offset by an approximately 2% year-over-year decline in commercial health plan membership, as unemployment rates rose across the country.

“We had anticipated more losses in commercial than we saw in the second quarter,” Aetna President Karen Lynch told analysts on an earnings call Wednesday morning. “We do think that’s related to companies doing more furloughs than eliminating jobs. However, as we turn the corner for the rest of the year, we anticipate we’ll see continued commercial losses due to unemployment.”

The drop in healthcare utilization experienced in the recent quarter is also not expected to last for the remainder of the year.

Lynch said CVS is projecting more normal levels of utilization in the second half of the year, with some fluctuations in areas of the country experiencing renewed waves of the virus.