Aetna Inc., the largest U.S. health insurer, Wednesday posted a wider-than-expected loss as it struggles with dozens of problems stemming from rapid expansion and underpriced insurance plans.
Hit by rising medical costs its biggest rivals have been able to overcome, Hartford, Conn.-based Aetna reported an operating loss that more than doubled from its first-quarter loss.
Chief Executive and Chairman John Rowe, who has led a new management team that has implemented a major restructuring since his appointment in September, said it has not been easy.
"To be frank, things have been harder than I expected them to be," he said. "The performance of the company is significantly worse than I expected.
"We have found about 100 problems here, each of which is contributing about 1% of the total problem. We just didn't have the kind of discipline in respect to operations." Aetna reported an operating loss of $95.9 million, or 67 cents a share, contrasted with operating earnings of $36.4 million, or 25 cents a share, a year earlier.
Analysts polled by research firm Thomson Financial/First Call expected Aetna to post a loss of 20 cents a share, with estimates ranging from a profit per share of 7 cents to a loss of 36 cents.
Aetna shares slipped 36 cents, or 1.3%, to close at $25.99 on the New York Stock Exchange. The stock is off 28% since the company issued a profit warning April 9 and has under-performed Standard & Poor's managed health-care index, which is down about 3% over that period.
The widening loss, on the heels of the first quarter's $36.6-million loss, caught analysts by surprise.
"Most people expected some modest deterioration in quarter results compared with the first quarter, but no one expected a loss of this magnitude," said analyst Todd Richter of Banc of America Securities, who has a "neutral" rating on the stock.
The 148-year-old firm's Health Care unit, which provides insured and self-insured health-care products and services, posted a loss before items of $35.4 million, contrasted with a profit of $99.2 million a year ago.