Aetna Q4 Profit Misses Wall Street Views

NEW YORK - Aetna Inc (AET) posted lower-than-expected quarterly profit on Friday, hurt by costs at its disability insurance business, and forecast 2010 earnings below Wall Street's target.

The fourth-quarter report closes a difficult 2009 for the No. 3 U.S. health insurer, which had previously warned investors that 2010 would be a "repositioning year."

It also contrasts with quarterly reports from other major health insurers, which have largely posted better-than-expected profits.

Aetna's fourth-quarter net income fell to $165.9 million, or 38 cents per share, from $194.7 million, or 42 cents per share, a year earlier, when it booked investment losses and various charges.

Excluding special items, earnings dropped to 40 cents per share from 96 cents. Analysts on average expected 42 cents, according to Thomson Reuters I/B/E/S.

Revenue rose about 13 percent to $8.76 billion.

In its commercial health plans, which mainly serve employers, Aetna spent 85 percent of premium revenue on medical costs, compared with 80.6 percent a year earlier. However, the ratio came in lower than Aetna's previous projection of 86.5 percent.

The cost spike reflected more people in Cobra plans for out-of-work Americans, who tend to use more medical services, and a general increase in claims per member. Costs from the H1N1 flu were lower than earlier projections.

Aetna's life, disability and long-term care products business posted an operating loss of $14.1 million, compared with year-earlier earnings of $17.7 million.

The company said it had to boost its disability reserves by about $50 million, in part to handle longer disability claim durations.

Aetna said it was also hit by higher costs for pensions for its employees.

The company forecast operating earnings per share of $2.55 to $2.65 for 2010, missing analysts' forecasts of $2.83 and below $2.75 reported for 2009.

Aetna warned last month that 2010 earnings were likely to be modestly lower than in 2009.

"We view 2010 as a repositioning year that will not fully reflect the earnings potential of our business," Chief Financial Officer Joseph Zubretsky said in a statement.

Aetna had taken down its 2009 profit forecast by as much as 30 percent from its initial view for the year, in part because of higher-than-projected medical costs.

Source: Reuters

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