Aetna sees steep 3Q profit drop

Aetna Inc., the Hartford, Conn.-based health insurer, announced today that its third-quarter profit dropped to $277.3 million, or 58 cents per share. That’s down from $496.7 million, or 95 cents per share, for the comparable period in 2007. Capital losses related to falling market values of securities in the company’s investment portfolio contributed to the tumbling profits. Net realized capital losses came to $232 million after tax — $120 million of which were due to other-than-temporary impairments of certain fixed-income investments that have lost value. The losses also include $70 million in impairments from holdings in debt securities from New York-based Lehman Brothers Holdings Inc. and Washington Mutual Inc. of Seattle. The carrier predicted its 2008 full year operating earnings per share guidance to range between $3.90 to $3.95 because of lower than expected net investment income in the fourth quarter. Next year looks a little rosier for Aetna, as it expects its operating earnings per share to increase 3% to 5% in 2009, including a projected 30-cent to 40-cent per share increase in the company’s 2009 pension expenses following 2008’s equity market performance. Nevertheless, the company believes that its capital adequacy and the liquidity of its holding company are strong. “Aetna is well capitalized with a strong balance sheet and excellent cash flows and liquidity,” Joseph M. Zubretsky, the company’s executive vice president and finance chief, said in a statement. “We expect to generate over $1 billion in excess capital in 2008 and currently have no need to raise additional capital.”