Aetna 2Q Profit Off 28%, Misses Views; Again Cuts 2009 Outlook

   DOW JONES NEWSWIRES 
 

Aetna Inc.'s (AET) second-quarter profit fell 28% on higher commercial medical costs as earnings fell short of analysts' expectations.

The health insurer, as a result, again cut its full-year profit outlook, this time to $2.75 to $2.90 a share from $3.55 to $3.70.

Aetna, considered one of the strongest players in commercial health plans, cut its 2009 forecast in early June, citing rising medical costs and lower-than-expected Medicare revenue. Some analysts have said margin pressures that the rest of the sector felt last year may catch up with Aetna this year and lead to more outlook cuts.

Chairman and Chief Executive Ronald Williams said Monday that Aetna continues to see upward pressure on medical costs beyond what it projected in early June, driven in part by "changing provider behavior in the face of a deep recession."

The company posted income of $346.6 million, or 77 cents a share, down from $480.5 million, or 97 cents a share, a year earlier. Excluding capital gains and losses among other items, earnings fell to 68 cents from 94 cents. The company had said in June it expected 76 cents to 80 cents.

Revenue increased 11% to $8.67 billion. Analysts polled by Thomson Reuters anticipated $8.59 billion.

Aetna said the higher commercial medical costs weren't captured in its pricing for this year, resulting in a higher commercial medical benefits ratio. Total medical benefits ratio, or the amount of premiums used to pay patient medical costs, jumped to 86.8% from 81.9% a year earlier.

Medical membership rose 8.9% from a year earlier and was flat with the prior quarter at 19.1 million.

Shares closed Friday at $26.44 and haven't traded premarket

-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353; [e-mail]