By Anna Wilde Mathews and Joshua Jamerson

Health insurer Aetna Inc. fielded questions from Wall Street about its growth plans as it reported earnings that beat analysts' expectations a week after a federal judge blocked its proposed merger with Humana Inc., citing antitrust concerns.

Aetna's net income dropped sharply in the fourth quarter, hurt by restructuring costs, though revenue rose.

Chief Executive Mark T. Bertolini said in an interview that the insurer wouldn't expand its presence in the Affordable Care Act's exchanges for 2018 and was re-evaluating its current footprint for next year. He said that Aetna had spoken with Capitol Hill officials and Trump transition representatives and that it is "too soon to tell" what will result from the Republican overhaul of the ACA, which he said he thought would take effect "at the earliest" in 2019. He said that "everybody is very concerned about doing something rash that would blow the thing up and put people out of coverage."

The company said it was still deciding whether to appeal the antitrust ruling against the Humana merger or terminate the deal, which is currently slated to expire on Feb. 15. The deal would have helped Aetna forge a diversified insurance giant with a balance between commercial and government lines, and rocketed it to the No. 1 position in the rapidly growing Medicare Advantage business. Without it, Aetna will have to find other paths to growth, and analysts pressed the company for signals about its plans as a stand-alone company.

Regarding engines for growthwithout Humana, Mr. Bertolini highlighted organic Medicare growth and the company's Medicaid business, despite some recent setbacks, as well as its core commercial franchise.

For 2017, if the Humana deal doesn't happen, Aetna said it anticipated earnings of at least $8.55 a share, compared with the consensus Wall Street projection of $8.79 a share. However, the 2017 guidance doesn't include projected gains from prior-period development, essentially the difference between money set aside for claims and the actual costs. Analysts said that if the prior-period development figure next year is assumed to be approximately the same as for 2016, the 2017 guidance would amount to around $9 a share.

The guidance also included some assumed share-repurchase activity for the first time since the proposed acquisition was announced in 2015, analysts said. Analysts are skeptical that the Humana acquisition will close, citing the federal judge's closely argued antitrust ruling.

Aetna attributed a 57% net earnings decline in the fourth quarter primarily to an increase in restructuring costs, which include a $215 million expense related to a previously announced voluntary early-retirement program.

The insurer said solid results from its core businesses paired with expense management helped offset pressures in its Affordable Care Act business.

Aetna said its losses on the ACA plans amounted to $450 million for the full year 2016, about $100 million more than it previously projected. Its enrollment in individual products at the end of 2016 was 965,000.

This year, Aetna has withdrawn from the ACA exchanges in 11 of the 15 states where it previously offered them, and it said its individual enrollment will drop to around 240,000 in the first quarter of 2017, about 190,000 of that through the health law's marketplaces. Aetna also said it expects continued, though smaller, losses on the ACA plans in 2017.

"There's a lot of interest in finding a solution" among Republicans, Mr. Bertolini said in the interview. He said there had been discussions about a structure that might help fund the cost of ACA-plan enrollees with expensive health conditions, perhaps reflecting the general approach used in a reinsurance program that Alaska officials created to prop up the exchange in that state.

In all, Aetna reported earnings in the fourth quarter of $139 million, or 39 cents a share, down from $321 million, or 91 cents a share, a year earlier. Excluding restructuring costs and other items, earnings came in at $1.63 a share.

Revenue rose 4.5% to $15.7 billion. Analysts polled by Thomson Reuters expected $1.44 a share on revenue of $15.8 billion.

Aetna's medical-loss ratio, a key measure of the amount of premiums used to pay patient medical costs, rose to 82.1% from 81.9%.

Write to Anna Wilde Mathewsat anna.mathews@wsj.com and Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

January 31, 2017 14:09 ET (19:09 GMT)

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