Silence may still be golden for Aetna shareholders.
On its earnings call Tuesday morning, Aetna Inc. refused to discuss "rumors and speculation" about a possible acquisition by CVS Health Corp. But don't take that as a sign the company isn't interested.
Though Aetna beat Wall Street's third-quarter earnings expectations and raised its 2017 earnings guidance, its path to future growth is uncertain. If CVS is genuinely offering $200 a share, then Aetna should be all ears.
The brightest spot in Aetna's quarter was its Medicare Advantage business. It's the fastest growing component of a government business of increasing importance to the company. Enrollment grew 8% in the quarter from a year earlier, and Aetna expects 2018 to be a solid year. But Aetna is fighting with multiple other insurers for a share of this market, making significant gains tougher.
Things aren't quite as rosy elsewhere. Aetna is exiting the Affordable Care Act's individual exchanges — good for near-term profitability, bad for revenue — and announced a sale of its group life and disability business earlier in October. Medicaid enrollment was down 21% year-over-year after some contract losses, a trend that may continue into next year.
As a result, Aetna's revenue growth will likely be muted next year. And profit will be impacted by the return of a suspended Obamacare tax on health insurers. Investors will have to wait until 2019 for better numbers. That may make a CVS approach more attractive.
