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Aetna reports wide loss
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August 8, 2001: 12:18 p.m. ET
Insurer cites high risk business costs for missing forecasts by 47 cents
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NEW YORK (CNNfn) - Aetna Inc. reported what one Wall Street analyst called an "eye-popping" loss for its fiscal second quarter Wednesday, sharply off the Street's expectations, as the nation's biggest health insurer continued to log higher costs and lost money in its health business.
Excluding unusual items, the Hartford, Conn.-based company reported a loss of $95.9 million, or 67 cents per share, compared with a profit of $36.4 million, or 25 cents a share, a year earlier. Analysts on average anticipated a loss of 20 cents a share, according to earnings tracker First Call.
Aetna's (AET: down $0.38 to $25.97, Research, Estimates) shares fell 78 cents to $25.57 in morning trading Wednesday following the earnings report.
Including one-time gains of about $67 million from discontinued products and exiting Medicare markets, Aetna posted a net loss of $29.2 million, or 20 cents a share, compared with a loss of $70.9 million, or 40 cents a share, a year earlier.
"I'm very concerned about it, because their health risk business is clearly deteriorating, and its really not showing any signs of improvement," J.P. Morgan analyst Lori Price told CNNfn's Market Call Wednesday. (WAV 381KB) (AIFF 381KB)
Revenue in the quarter fell to $6.5 billion from $6.7 billion. Aetna shares ended unchanged at $26.35 Tuesday.
"The results in our health-care risk business continue to reflect higher medical costs resulting primarily from higher utilization," CEO John Rowe said.
In a research note Wednesday, Goldman Sachs Analyst Charles Boorady called the loss "eye-popping" and said Aetna and many of its competitors will be forced to raise prices and drop enrollment in order to stay afloat. That could benefit other insurers like UnitedHealth Group Inc., the No. 2 managed health care operator.
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UnitedHealth Group said its profit rose 31 percent in the second quarter and raised its forecasts for the year. Cigna Corp., the third-largest health insurer, reported a 6 percent decline in second-quarter earnings to $262 million, but warned rising medical costs could hurt results for the rest of the year.
Rowe said Aetna is beginning to manage costs and to focus on more profitable growth segments, such as catering to mid-size businesses, but that any changes "will not substantially benefit our results this year."
But the company said it anticipates improved growth in 2002 and that its results will be comparable to competitors by the end of 2003. 
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Aetna
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