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Aetna Shares Rise 13% on Medical Plan Gains

Earnings: Second-biggest U.S. health insurer reports $64.9-million operating profit as principal division jumps back into the black.

April 26, 2002|From Times Wire Services

Aetna Inc. shares rose 13% after the second-biggest U.S. health insurer said its medical plans showed their first profit in a year and a half.

The Hartford, Conn.-based company posted a net loss of $2.83 billion, or $19 a share, including a $2.97-billion noncash charge, mostly for the write-down of the value of past acquisitions, compared with a loss of $48.2 million, or 34 cents a share, a year earlier.

Before special items, Aetna's profit rose to $64.9 million, or 44 cents a share, from $15 million, or 10 cents a share, a year ago. Analysts on average expected profit of 3 cents a share.

Revenue fell to $5.26 billion from $6.43 billion.

Aetna's health-care business had an operating profit of $44.7 million in the first quarter, contrasted with a loss of $72.7 million a year earlier. The company also operates a group insurance unit and a pension management business.

Shares of Aetna rose $5.93 to $49.91 on the New York Stock Exchange and helped fuel a broad rally in health insurance stocks, which have been among this year's biggest gainers on Wall Street.

Chief Executive John Rowe is raising some premiums more than 20% and reducing costs to deliver on his promise of profit from operations this year.

Aetna also is dropping millions of unprofitable customers and working with doctors to control spending for laboratory and radiology services.

Aetna expects 2002 profit from operations, excluding the write-down of acquisitions, of $1.25 to $1.35 a share.

Rowe said he plans to reduce overhead costs by $300 million this year and won't rule out job cuts.

Premiums are expected to rise 18% this year, ahead of medical cost increases of 15% to 16%.

The premium increases have helped Rowe drive away unprofitable business. Membership will fall to 14 million by the end of the year, from 15 million in the first quarter, Aetna said. Aetna had 17.2million customers at the end of last year.

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Bloomberg News and Reuters were used in compiling this report.

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