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Earnings Rise for Aetna on Higher Fees, Cost Cuts

November 01, 2002|From Bloomberg News

Aetna Inc. reported a third-quarter profit Thursday as the second-largest U.S. health insurer raised premiums and held down medical costs.

Net income was $98.8 million, or 64 cents a share, compared with a loss of $54.4 million, or 38 cents, a year earlier, the company said. Revenue fell 22% to $4.83 billion.

Aetna cut medical costs by dropping millions of members it considered too costly to insure and raised premiums 20% for others.

Chief Executive John Rowe, who announced 6,000 job cuts in December and wants to slash 2,700 more during the next year, wants to shave $300 million from operating costs this year to return the company to profitability after two years of losses.

Rowe said during a conference call that the company expects to cut more than $100 million in operating costs next year.

Third-quarter profit would have been 73 cents a share without a gain from the settlement of a customer contract and from medical claims being lower than Aetna anticipated in prior quarters, spokesman Fred Laberge said. On that basis, analysts surveyed by Thomson First Call expected a profit of 70 cents.

Shares of the Hartford, Conn.-based company Thursday fell 66 cents to $40.30 on the New York Stock Exchange.

The company had almost 14 million members when the quarter ended, down almost 500,000 from the second quarter.

Aetna expects to lose more members in the first quarter of 2003 because of premium increases, then begin to add customers as it competes with rivals such as UnitedHealth Group Inc. and Cigna Corp.

Aetna raised its 2002 profit forecast Thursday to $2.57 to $2.62 a share, from the $2.20 to $2.25 range it predicted Oct. 9. The company lost $1.95 a share last year.

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