Aetna Profit Down on Investments, But Meets Views

Aetna posted a 44 percent drop in third-quarter profit on Wednesday, hurt by investment losses stemming from the credit crisis, and the No. 3 U.S. health insurer lowered its full-year forecast slightly.

The company also projected earnings per share, excluding items, would rise 3 percent to 5 percent next year, potentially below analyst forecasts.

CNBC.com

Net income fell to $277.3 million, or 58 cents per share, from $496.7 million, or 95 cents per share, a year earlier.

The Hartford, Connecticut-based company reported net realized capital losses of 48 cents per share.

Health-insurer stocks, already down this year due to a series of profit warnings, have been pressured during the credit crisis as investors worry about potential sizable write-downs and the companies' balance sheets.

Excluding the investment losses and other items, Aetna's earnings of $1.12 a share matched the average expectation of analysts, according to Reuters Estimates.

Ronald Williams, CEO and chairman of Aetna told CNBC that he is very pleased with his company's earnings results.

“I would say that we had a very strong quarter," he said. "Particularly in the context of the challenging environment and we’ve given the guidance that indicates we’re going to have a industry leading performance for the rest of the year.”

Membership was 17.7 million at the end of the quarter, up 6.4 percent from a year ago.

Aetna's medical benefit ratio for its commercial plans for employers, a key measure of the premiums spent on medical costs, worsened to 79.2 percent from 78.6 percent a year ago. The company expects the ratio to be about 80 percent for the year.

Revenue rose 9.5 percent to $7.6 billion.

Aetna cut its full-year earnings forecast to a range of $3.90 to $3.95 per share, excluding items, citing lower investment income. It previously forecast $4 per share.

The 2009 profit forecast included a projected 30-cent to 40-cent-per-share increase in expenses to account for lower investment income from Aetna's pension fund. The company said the expenses were a noncash accounting item, and the pensions are fully funded.

The 2009 forecast would result in earnings per share of about $4.02 to $4.15. Analysts were expecting $4.44, but it was not immediately clear if the estimate was directly comparable.

Sanford Bernstein analyst Ana Gupte said in a research note that the 2009 forecast was "somewhat disappointing.''

Aetna shares have fallen about 52 percent this year, less than a 58 percent drop for the S&P Managed Health Care index.

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