Earnings Preview: Aetna's outlook, enrollment eyed

posted: 6 DAYS 16 HOURS AGO

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INDIANAPOLIS -Managed care provider Aetna Inc. reports its fourth-quarter results Friday before the market opens.

WHAT TO WATCH FOR: The Hartford, Conn., insurer saw its shares tumble briefly last month after forecasting lower-than-expected 2009 operating earnings. The insurer also said it expects 2010 operating earnings to be "modestly lower" than last year.

Analysts will look for updates on the 2010 outlook, which company officials have attributed to pricing pressure in part of its commercial business and Medicare Advantage reimbursement cuts.

Aetna's third-quarter profit climbed 18 percent, to $326.2 million, or 73 cents per share. But the insurer's operating earnings fell in part because medical costs climbed faster than it expected.

Aetna struggled with pricing its insurance last year, but company leaders have said they have taken steps to fix that.

Several health insurers have been hit by enrollment losses, as the recession forced companies to cut jobs and trim the number of people covered by employer-sponsored health insurance. Aetna is the third-largest managed care company based on medical enrollment.

Its two bigger competitors, UnitedHealth Group Inc. and WellPoint Inc., both reported slower enrollment declines in their fourth quarters. But the losses are expected to remain a concern at least until later this year.

Aetna has said it expected to end 2009 with enrollment of about 18.8 million people, which would reflect a drop from the start of the year but a 6 percent increase over 2008.

In November, Aetna said it planned to cut 625 jobs, or nearly 2 percent of its staff. The company will take a $65 million charge in the quarter for that.

WHY IT MATTERS: Commercial enrollment levels for health insurers can offer some insight into the economy's recovery by showing whether companies are still cutting jobs or employer-sponsored health coverage. Insurers also announce in the first quarter enrollment gains from large national accounts that started coverage Jan. 1.

WHAT'S EXPECTED: Analysts polled by Thomson Reuters expect, on average, earnings per share of 42 cents on $8.6 billion in revenue for the fourth quarter. For 2009, analysts expect earnings of $2.76 per share on $34.6 billion in revenue.

LAST YEAR'S QUARTER: Aetna earned $194.7 million, or 42 cents per share in the final quarter of 2008, 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.

Several one-time charges hurt the insurer's profit. They included net realized capital losses of 42 cents per share.

2010-02-03 14:50:55