Managed-care company Aetna Inc. on Tuesday cut its full-year profit expectations below analysts' forecasts due mainly to rising commercial medical costs and lower projected Medicare revenue.
The Connecticut-based insurer said in a statement released after the market closed that it now expects 2009 operating earnings to range between $3.55 and $3.70 per share. That's down from earlier guidance of $3.85 to $3.95 per share.
Analysts surveyed by Thomson Reuters expect, on average, a higher full-year profit of $3.80 per share.
The health insurer's stock tumbled more than 7 percent, or $2.07, to $25.20 in after-hours trading following the announcement. Shares closed earlier down 10 cents at $27.27.
Aetna Chief Financial Officer Joe Zubretsky said the company is seeing the continuation of a trend it first saw late last year. Members in its commercial business are using either more services or higher-value services, which affects medical costs.
"It is very clear in the data that a higher level of services and a higher number of services are being applied to similar diagnoses than were applied in past months," he said.
Company officials did not say why the trend was happening, and Zubretsky said Aetna didn't price fully to this behavior change.
"But now with our revised view, we are going to anticipate and estimate that this trend will continue and that our pricing models will catch up to this," he said.
Aetna also changed its guidance based on a lowered estimate of revenue from Medicare.
Zubretsky said the company just finished putting together its bids for next year's Medicare business, which were due June 1. In reviewing the most recent information available, the company determined a revision of its current-year estimate was needed.
Zubretsky said he is "very confident" in the new guidance.
Copyright 2009 AP News
