Tags: US | Earns | Aetna

Aetna Profit Falls 15 Percent on Medical Costs

Friday, 05 Feb 2010 09:17 AM

Health insurer Aetna Inc. said Friday its fourth-quarter profit fell 15 percent, as it continued to struggle with rising medical costs, which hurt its performance every quarter last year.

The Hartford, Conn., managed care company said medical costs, its largest expense, climbed 14 percent to $6.1 billion in the three months that ended Dec. 31. That hit was partially offset by a 9 percent increase in premiums.

Aetna has tied the rising costs to the slumping economy. But analysts also have said the insurer set prices too low, which helped it gain enrollment but hurt the company when medical costs rose.

CEO Ronald Williams said in the third quarter the insurer's 2009 pricing wasn't what Aetna needed to deliver the results it had been delivering, but the company took several steps to fix that.

Aetna earned $165.9 million, or 38 cents per share, in fourth quarter of 2009. That's down from the $194.7 million, or 42 cents per share, in the same period the prior year. Excluding one-time items it said profit totaled 40 cents per share.

Revenue rose 13 percent to $8.76 billion.

Analyst polled by Thomson Reuters forecast, on average, a profit of 42 cents per share on $8.65 billion in revenue.

Goldman Sachs analyst Matthew Borsch said in a research note the insurer reported lower-than-expected earnings, but results show "clear signs" of strengthening in core operating results. He noted Aetna's cash flow is strong and its health care earnings were higher than he expected.

Aetna said claims rose partly due to treatment for swine flu and greater use of temporary COBRA insurance coverage. Aetna said it spent 85 percent of its commercial premium revenue on medical costs, up from 80.6 percent a year ago.

Commercial premiums include revenue from employer-sponsored group insurance and individual policies, not government programs like Medicaid or Medicare Advantage.

For the full year, Aetna said its profit fell 8 percent, to $1.28 billion from $1.38 billion. On a per-share basis, profit rose to $2.84 from $2.83 because the company now has fewer shares on the market.

Its revenue rose 12 percent to $34.76 billion from $30.95 billion.

For 2010, Aetna forecast an operating profit of $2.55 to $2.65 per share in 2010. Analysts expect $2.83 per share.

The insurer has said it expects 2010 operating earnings to be "modestly lower" than last year. Company leaders have attributed that to pricing pressure in part of its commercial business and to Medicare Advantage reimbursement cuts.

Aetna competitors UnitedHealth Group Inc., WellPoint Inc., Humana Inc. and Cigna Corp. all reported fourth-quarter profits that either met or exceeded Wall Street expectations. But each also saw sizable enrollment drops compared to the same quarter of 2008.

Several health insurers have been hit by enrollment losses, as companies cut jobs and trimmed the number of people covered by employer-sponsored health insurance.

However, Aetna ended 2009 with enrollment of 18.9 million people, a 7 percent increase over 2008.

Aetna took a $65 million charge in the fourth quarter for two rounds of job cuts it recently completed. The insurer cut 625 jobs in November and then recently cut the same amount.

The company is the third largest publicly traded health insurer based on medical enrollment.

© Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

1Like our page
2Share
Companies
Health insurer Aetna Inc. said Friday its fourth-quarter profit fell 15 percent, as it continued to struggle with rising medical costs, which hurt its performance every quarter last year.The Hartford, Conn., managed care company said medical costs, its largest expense,...
US,Earns,Aetna
535
2010-17-05
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved