Aetna 2Q profit slides on commercial medical costs

Health insurer Aetna Inc. said Monday its profit skidded 28 percent in the second quarter due to higher medical expenses in its commercial business, which it expects to continue for the rest of the year.
JUL 27, 2009
By  Bloomberg
Health insurer Aetna Inc. said Monday its profit skidded 28 percent in the second quarter due to higher medical expenses in its commercial business, which it expects to continue for the rest of the year. The Hartford, Conn., company said it earned $346.6 million, or 77 cents per share, compared with $480.5 million, or 97 cents per share. Adjusted earnings per share were 68 cents. Revenue grew 11 percent to $8.67 billion from $7.83 billion. Thomson Reuters says analysts expected 78 cents per share and revenue of $8.56 billion. In premarket trading, Aetna shares gave up $2.44, or 9.2 percent, to $24. The stock closed at $26.44 Friday. Aetna said its medical benefit ratio, which measures the portion of premium dollars spent on providing care, rose to 86.8 percent from 81.9 percent a year ago. Costs in the commercial, Medicare and Medicaid business all increased. Premium revenue grew 12 percent, and medical membership was flat at 19.1 million. The company had been scheduled to post its earnings on Wednesday, but announced Sunday it would be reporting on Monday. It did not give a reason for the change. Aetna said commercial medical costs increased due to use of more expensive services, and more tests and procedures per visit. That lead to higher costs for emergency room, urgent care, laboratory and preventive services. Aetna said its prices did not fully account for the higher costs, and said health plan providers are changing their behavior due to the recession. It cut its annual profit forecast for the second time in two months. The company now expects to earn between $2.75 to $2.90 per share. On June 2, it lowered its profit estimate to a range of $3.55 to $3.70 per share, also because of greater commercial medical costs and lower revenue from the federal health care program Medicare. Analysts expect earnings of $3.53 per share and $34.35 billion in revenue. Aetna expects to spend between 84 and 84.5 percent of its commercial premium revenue on providing medical care. The Wall Street Journal reported Monday that Aetna is shopping its pharmacy benefits management business, which had about 11.2 million members at the end of the second quarter. Aetna has reportedly been considering a sale for several months and no deal was said to be imminent. According to the report, independent pharmacy benefits managers CVS Caremark Corp. and Medco Health Solutions Inc. have looked into buying the Aetna business. Another health insurer, WellPoint Inc., sold its pharmacy benefits management unit to Express Scripts Inc. in April.

Latest News

Social Security trustees see one less year in insolvency countdown, project shortfall to start 2034
Social Security trustees see one less year in insolvency countdown, project shortfall to start 2034

New report shows dimmed outlook for benefits to retirees and disabled Americans, creating further pressure for federal tax hikes or more borrowing.

NY Republican Stefanik presses SEC to probe Harvard bond sale
NY Republican Stefanik presses SEC to probe Harvard bond sale

Open letter to SEC Chair Paul Atkins questions whether the Ivy League university withheld material information prior to its $750 million taxable bond offering.

Ex-LPL leader re-emerges at The Wealth Consulting Group
Ex-LPL leader re-emerges at The Wealth Consulting Group

The Las Vegas-based hybrid RIA overseeing $8.8 billion in assets has named Andy Kalbaugh president to help scale its advisor platform.

Envestnet extends investment offerings with new alts model portfolios
Envestnet extends investment offerings with new alts model portfolios

The wealth tech giant – in collaboration with Fidelity, BlackRock, State Street, and Franklin Templeton – is offering its advisor and wealth firm users more ways to diversify.

Just as wealth industry M&A was picking up, economic uncertainty could kill it again
Just as wealth industry M&A was picking up, economic uncertainty could kill it again

Deal volume increased post-election but now caution has taken over.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave