INDIANAPOLIS – Aetna closed the fourth-quarter earnings season for big health insurers on Thursday with yet another report of tumbling profit triggered by the slumping economy.
But the Hartford, Conn.-based managed-care company also assured analysts that it remains strong and said it expects to add more than 1 million health insurance customers this year.
Aetna earned $194.7 million, or 42 cents per share, down from $448.4 million, or 87 cents per share, in the same quarter of 2007. Revenue grew 9 percent to $7.76 billion from $7.14 billion.
Operating earnings, which exclude one-time items like investment losses, were 96 cents per share. That topped expectations.
Thomson Reuters said analysts, on average, forecast 94 cents per share and $7.96 billion in revenue. Analysts typically exclude one-time items in their estimates.
“The quarter appears consistent in many respects with Aetna’s guidance and the sector earnings trend this quarter (in line, but not good quality),” Goldman Sachs analyst Matthew Borsch said in a research note.
A lower-than-expected tax rate helped Aetna’s fourth-quarter earnings, Oppenheimer analyst Carl McDonald said in another research note.
“This wasn’t Aetna’s most pristine quarter, to be sure, but its quarterly results do look superior relative to what we’ve seen from most of the other diversified plans this quarter,” McDonald wrote.
Aetna’s 57 percent quarterly profit drop fell between the 40 percent and 61 percent declines reported last month by Minnetonka, Minn.-based UnitedHealth Group Inc. and Indianapolis-based WellPoint Inc., respectively.
Insurers in general have been stung by losses tied to investments as the global markets plunged amid the financial crisis. Analysts say some also may see enrollment declines this year, as employers cut jobs and reduce the number of people covered by private insurance.
Aetna, the third-largest U.S. insurer based on enrollment, increased its medical enrollment by 848,000 members last year to finish 2008 with 17.7 million. Company officials said they expect to add as many as 1.3 million members in the first quarter with new accounts, but the economy may prevent the total from growing much beyond that.
Aetna reported after-tax, net realized investment losses of $482 million for 2008. Of that total, roughly $100 million came from actual credit-related losses. The rest came from investment portfolio write downs, Chief Financial Officer Joe Zubretsky said.
“Our capital and liquidity position is very strong,” Zubretsky said during a conference call with analysts.
Aetna recorded a $35.6 million charge in the fourth-quarter for severance costs. The insurer said in December it would cut 1,000 jobs, or nearly 3 percent of its work force.
The company also took a $20 million charge for a settlement with the New York Attorney General’s Office to establish a database that will be used to figure out-of-network medical claims reimbursements.
In 2008, Aetna’s profit fell 24 percent to $1.38 billion, or $2.83 per share, from $1.83 billion, or $3.47 per share. Annual revenue grew 12 percent to $31 billion.
For this year, Aetna said it expects operating earnings of $3.85 to $3.95 per share. Analysts expect, on average, $3.87 per share.
Aetna shares rose 82 cents, or 2.5 percent, to close at $33.06 Thursday.
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AP Business Writer Marley Seaman in New York contributed to this report.
