Aetna needs two years to regain fiscal health, analyst says

Health insurer Aetna Inc. will need two years to bring its profit margins back to their former levels, an Oppenheimer analyst said today in a note to client. Analyst Carl McDonald said he spoke with Aetna Chief Financial Officer Joseph Zubretsky on Friday. According to McDonald, Zubretsky said Aetna stands behind its profit guidance for the rest of 2009, but returning to its previous goals will take more time. In July, Aetna said its profit fell 28 percent in the second quarter due to rising medical costs. McDonald said the company priced about 25 percent of its products for 2010 before discovering the trend toward higher costs. Aetna has cut its profit forecast twice since June, and now expects a profit of $2.75 to $2.90 per share. Analysts expect earnings of $2.87 per share on average, according to Thomson Reuters. McDonald said Zubretsky told him Aetna's enrollment won't grow next year, but the CFO believes his company can keep most of its current membership. McDonald said he expects Aetna's enrollment to decrease in 2010, however. The analyst also said Aetna had no new details on a potential sale of its pharmacy benefit management business. McDonald kept an "Outperform" rating and a price target of $32 per share on the Hartford, Conn., company. Aetna shares closed at $28.28 Friday, and have traded between $14.21 and $44.64 over the past 52 weeks.