Thursday, February 10, 2005

Aetna profit jumps 21%; health insurer boosts 2005 outlook

Reuters

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CHICAGO - Health insurer Aetna Inc. on Thursday said quarterly earnings grew by 21 percent and also boosted its 2005 forecast, buoyed by better-than-expected membership enrollment.

The company, which also set a 2-for-1 stock split and doubled its dividend, said medical membership grew 5 percent to 13.7 million. The company has reversed a years-long membership slide during which it slipped to the third-biggest U.S. health insurer from its former No. 1 rank.

Fourth-quarter net income rose to $300.7 million, or $1.95 per share, from $249.5 million, or $1.56 per share, a year earlier.

Excluding items, the Hartford, Connecticut, company earned $1.82 per share in the latest quarter. Analysts on average were expecting $1.79.

Revenue jumped 13 percent to $5.2 billion, driven by an 86,000 increase in medical membership.

Aetna forecast 2005 operating earnings of $8.75 to $8.90 per share, above Wall Street's current expectation of $8.51, and lifted its outlook for membership growth to between 950,000 and 1.05 million members.

Aetna said the increased forecast was due to a strong January 2005 selling season and price discipline.

"The raised guidance and indications of a strong 2005 enrollment show a company firing on all cylinders, in our view," said Prudential analyst David Shove in an investor note.

In the consolidating managed health-care business, investors eye acquisition activity and membership growth as key drivers for earnings.

Aetna, which suffered through a series of troubled mergers in recent years, has said it will not make any acquisitions of more than $500 million.

On the medical cost side, Aetna said a key measure of its effectiveness in taming costs for doctors, hospitals and pharmaceuticals -- the so-called medical cost ratio -- worsened slightly.