Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Nyse  >  Aetna Inc    AET

SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsSector newsTweets 

Aetna Profit Declines As Health-Care Costs Rebound

share with twitter share with LinkedIn share with facebook
share via e-mail
0
04/26/2012 | 10:53pm CET

--Aetna earnings decline, missing analyst expectations

--Insurer didn't benefit from surplus money set aside to pay claims, as it did a year ago

--Company reiterates full-year guidance

(Adds company comments regarding expected cost trends and reserve assumptions. Adds closing stock price.)

 
   By Jon Kamp 
   Of  
 

Aetna Inc.'s (>> Aetna Inc.) first-quarter earnings declined 13%, falling short of Wall Street expectations, after the insurer found it didn't have a surplus in money set aside to cover earlier patient claims, a possible indication patients are making more doctors visits after a long slump.

Aetna and other insurers establish reserves to cover claims for the current period and prior ones. If those reserves wind up too high, as has been the trend with patients lightly using health-care services, the extra money is added to earnings.

In the first quarter, the money Aetna set aside for fourth-quarter claims turned out to be more on target, leaving less money to add to the bottom line. Aetna pegged the lack of extra money to stabilizing medical costs late last year, but was hesitant to suggest usage trends are significantly changing.

Everybody is "sort of feeling for the bottom here where a trend stops decelerating and starts to tick up," said Mark Bertolini, Aetna's chairman and chief executive, on a call with analysts.

The company on Thursday maintained its forecast for an uptick in health-system usage this year. A spokeswoman said Aetna is comfortable with its reserve assumptions for the first quarter based on its expectation for rising costs. Chief Financial Officer Joseph Zubretsky said on the call that Aetna has made "prudent assumptions regarding medical cost trends for 2012."

Still, the disappointing results spooked investors, who sent Aetna shares plunging, down 8.2% to $45.31. The news also weighed on some other insurers, as UnitedHealth Group Inc. (UNH) slipped 0.9% to $58.37, and Cigna Inc. (>> CIGNA Corporation) declined 1.4% to $47.56.

There could be broader implications, as Goldman Sachs analyst Matthew Borsch said the pressure on margins seen at Aetna "reflects industry trends more than company-specific issues." This pressure comes from a mix of modestly increasing medical cost trends and intensifying price competition, the analyst said.

Health-care observers have been watching for an acceleration in medical usage after a long period of patients avoiding visits to doctors' offices and hospitals because of the still-uncertain economy. Recent signals from around the health-care sector have been mixed, with signs of higher spending coming from some corners, such as among replacement-joint manufacturers.

CFO Zubretsky said Aetna's results reflect "the stabilizing medical cost trend we observed in the fourth quarter." He noted that earlier last year, trends that reflect a mix of health costs and how much patients use the system decreased significantly below Aetna's expectations, leading to positive reserves.

In an interview, Zubretsky added that the company isn't saying this cost trend picked up in the fourth quarter. Rather, "I would say it stopped decelerating," he said.

Aetna said its total medical-benefit ratio--or the amount of premiums used to pay patient medical costs--rose to 81.5% in the first quarter, from 79.2% a year earlier and 80.7% in the prior quarter.

The ratio was pushed lower last year by the fact Aetna set aside more money than it wound up needing to pay claims. "There was no significant prior-years reserve development in the first quarter of 2012," Aetna said Thursday.

Overall, Aetna reported a first-quarter profit of $511 million, or $1.43 a share, down from $586 million, or $1.50 a share, a year earlier. Operating earnings in the latest period were $1.34 a share.

Revenue excluding capital gains and losses increased 6.2% to $8.86 billion, mostly owing to higher health-care premiums and fees. Analysts polled by Thomson Reuters had projected earnings of $1.40 a share on revenue of $8.69 billion.

After the strong results from other insurers, "and the market's optimistic assumptions about where Aetna's guidance could go, it's hard to see how this quarter isn't viewed as a disappointment," Citigroup analyst Carl McDonald said.

Despite the light first-quarter earnings, the company reiterated its guidance for full-year operating earnings of about $5 a share, while saying it expects to boost membership over the year after a first-quarter decline.

Aetna ended the first quarter with about 17.9 million medical members, a decline of 544,000 from the fourth quarter, reflecting an expected decrease in the company's commercial business and the company's exit from Connecticut's Medicaid program. Bertolini said Aetna expects to grow to 18.2 million medical members over the course of this year.

"We're seeing positive momentum in our 2013 selling season with early National Accounts wins and new business opportunities that are twice what they were a year ago," the CEO said.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

Order free Annual Report for Aetna, Inc.

Visit http://djnweurope.ar.wilink.com/?ticker=US00817Y1082 or call +44 (0)208 391 6028

Order free Annual Report for CIGNA Corp.

Visit http://djnweurope.ar.wilink.com/?ticker=US1255091092 or call +44 (0)208 391 6028

Order free Annual Report for UnitedHealth Group, Inc.

Visit http://djnweurope.ar.wilink.com/?ticker=US91324P1021 or call +44 (0)208 391 6028

Stocks mentioned in the article : Aetna Inc., CIGNA Corporation
share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on AETNA INC
02/24DJTrump to Meet With Insurance Executives on Repeal of Affordable Care Act -- U..
02/22 Lundin Law PC Announces Securities Class Action Lawsuit against Aetna Inc. an..
02/22 AETNA INC : Lundin Law PC Announces Securities Class Action Lawsuit against Aetn..
02/22 AETNA INC /PA/ : Entry into a Material Definitive Agreement, Creation of a Direc..
02/22 AET The Law Offices of Vincent Wong Reminds Investors of Commencement of a Cl..
02/22 AETNA : Health insurer Aetna to spend $3.3B buying back stock
02/22 AETNA : Announces $3.3 Billion Accelerated Share Repurchase
02/21 AETNA : Introducing Aetna Better Health of Florida®
02/21 AETNA INC : SHAREHOLDER NOTICE: Lundin Law PC Announces Securities Class Action ..
02/21 AETNA INC : Lundin Law PC Announces Securities Class Action Lawsuit against Aetn..
More news
Sector news : Managed Healthcare - NEC
02/24DJTrump to Meet With Insurance Executives on Repeal of Affordable Care Act -- U..
02/23 CIGNA : CFO Thomas McCarthy to retire
02/17DJAETNA : Doubles Dividend, Boosts Stock Buyback Plans
02/16DJCIGNA : Court Issues Temporary Order Keeping Cigna From Terminating Merger With ..
02/16DJANTHEM : Countersues After Cigna Ends Deal -- WSJ
More sector news : Managed Healthcare - NEC
News from SeekingAlpha
02/24 Tracking Larry Robbins' Glenview Capital Management Portfolio - Q4 2016 Updat..
02/22 Aetna initiates accelerated $3.3B share buyback
02/17 Aetna declares $0.50 dividend
02/17 Aetna authorizes $4B repurchase, declares $0.50 per share quarterly dividend
02/15 Trump administration proposes changes to ACA to reduce sign-ups by sick peopl..
Advertisement
Financials ($)
Sales 2017 60 289 M
EBIT 2017 4 672 M
Net income 2017 2 344 M
Debt 2017 2 991 M
Yield 2017 1,17%
P/E ratio 2017 19,21
P/E ratio 2018 14,23
Capi. / Sales 2017 0,80x
Capi. / Sales 2018 0,71x
Capitalization 45 522 M
More Financials
Chart AETNA INC
Duration : Period :
Aetna Inc Technical Analysis Chart | AET | US00817Y1082 | 4-Traders
Full-screen chart
Technical analysis trends AETNA INC
Short TermMid-TermLong Term
TrendsBullishNeutralNeutral
Technical analysis
Income Statement Evolution
More Financials
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 21
Average target price 140 $
Spread / Average Target 7,8%
Consensus details
EPS Revisions
More Estimates Revisions
Managers
NameTitle
Mark T. Bertolini Chairman & Chief Executive Officer
Karen S. Lynch President
Margaret M. McCarthy Executive Vice President-Operations & Technology
Shawn M. Guertin CFO, Executive VP & Chief Enterprise Risk Officer
Harold L. Paz Chief Medical Officer & Executive Vice President
More about the company
Sector and Competitors
1st jan.Capitalization (M$)
AETNA INC3.85%45 522
UNITEDHEALTH GROUP INC0.33%154 659
ANTHEM INC13.56%43 182
CIGNA CORPORATION10.59%37 872
HUMANA INC0.82%30 613
CENTENE CORP24.30%12 134
More Results