Aetna sees 2Q profit fall 28 percent; lowers 2009 earnings forecast.

Just a quick thought on this. If the media and the president paints that insurers are making 30% profit, where is the evidence. Read Below and share your thoughts.

On its Final Word program, Bloomberg Television (7/27, 3:39 p.m. ET) reported, “One of the drags on the [stock] market today is Aetna — they reported disappointing earnings news and shares have been falling all day.” Bloomberg’s Laura Lee added, “If you are an investor, this is not good news. The country’s third-largest health insurer said that profit fell 28 percent in the second quarter, missing analysts’ estimates. On top of that, Aetna cut its full-year profit forecast for the second time in two months.” According to Lee, “Investors did not take the news well”; and Aetna’s “shares fell nearly seven percent. … Analysts say that what is most troubling is that Aetna does not seem to have a good handle on what profits will look like going forward.”

Bloomberg News (7/28, Nussbaum) reports that in addition to Aetna’s 2Q profit drop, the insurer’s “net income dropped to $346.6 million, or 77 cents a share, from $480.5 million, or 97 cents, a year earlier”; and its adjusted profit “of 68 cents a share missed the 78-cent average estimate of 14 analysts in a Bloomberg survey. Revenue rose 11 percent to $8.67 billion.” Furthermore, although “enrollment in medical plans rose 9.1 percent to 19.1 million”; Aetna said it spent “86.8 percent of premium revenue on medical cost for patients, a jump from 81.9 percent last year.” To address losses, Aetna said it “is raising premiums and trying to control costs through measures such as audits of high-volume hospitals or doctors.” Bloomberg News adds that Aetna “is the second-worst performer this year among the six stocks in the Standard & Poor’s 500 managed-care index.” Notably, Oppenheimer analyst Carl McDonald said that in the overall stock market, “investor worries that healthcare legislation in Washington will hurt the industry have weighed down managed-care shares.”

The AP (7/28, Seaman, Murphy) notes that Aetna has “seen a rise, in particular, in claims costing between $10,000 and $50,000 since late last year. Analysts also have said they felt Aetna set prices too low this year in the competitive commercial market, which contributed to the company’s performance.”

According to the Wall Street Journal (7/28, B3, Johnson, Fuhrmans, subscription required), Aetna blamed its losses “on members’ increased use of medical services, and on health providers’ higher billings per case.” The company said “some members seem to be stepping up their use of more expensive medical services because they fear losing their jobs and health-insurance coverage. Simultaneously, some doctors and hospitals appear to be ordering more tests and procedures, it said.”

In an interview with the AP (7/28), Aetna CFO Joe Zubretsky “talked about the company’s reserves in light of its performance and more conservative 2009 forecast.” He said that Aetna “strengthened its reserves by $60 million, after considering the higher costs it saw in the second quarter.”

Aetna allegedly considering sell-off of pharmacy-benefits unit. Bloomberg Television (7/27, 9:17 a.m. ET), on its Starting Bell segment, reported, “Aetna is considering selling its pharmacy management benefits (PBM) company, according to the Wall Street Journal (7/28, B1, McCracken, Johnson, subscription required). It is being looked at by CVS and Medco Pharmacy Solutions. This comes on the same day that the insurer’s second quarter profits slumped and Aetna cut its 2009 forecast.”

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