Aetna 4Q profit rises 4 percent

Health insurer Aetna Inc. said Thursday its fourth-quarter profit increased 4 percent as growing medical enrollment lifted health care premiums. The company also raised profit guidance for the full year.

Net income was $434.1 million, or 80 cents per share, up from $416.3 million, or 70 cents per share, a year ago. Excluding favorable reserve development and a previously announced severance charge, profit was 76 cents per share in the latest period.

Total revenue was up 8 percent to $6.36 billion from $5.87 billion a year earlier.

The results were in line with analysts' consensus estimates, according to a Thomson Financial poll.

But its shares tumbled $1.14, or 2.6 percent, to $42.86 in morning trading on the New York Stock Exchange.

Aetna said medical membership increased by 50,000 in the fourth quarter and 678,000 for the full year to 15.43 million, an increase of 5 percent over 2005. Quarterly pharmacy membership increased by 13,000 to 10.22 million and dental membership rose by 76,000 to 13.47 million.

Aetna raised its outlook for fiscal 2007 adjusted earnings to $3.30 per share from $3.26 previously, and said it sees first-quarter profit of 77 cents. Analysts are currently predicting 2007 profit of $3.27 per share, on average, and first-quarter earnings of 77 cents.

"This reflects solid revenue growth with membership increases," Chairman and Chief Executive Officer Ronald Williams told investor analysts in a conference call Thursday morning. "Growth in every geographic region exceeded that of our competitors."

Aetna's membership of 15.4 million is a "direct result" of the insurer's efforts to broaden its reach into new geographic areas and new customer segments, he said.

Aetna is coming off a period of strong growth. Third-quarter profits rose by 28 percent, driven in part by aggressive efforts that added 733,000 customers in the last year.

Company officials attributed the profits to efforts to expand into new geographic areas and a growth in specialty products, such as life insurance.

The company also laid off 650 employees last year, about 2 percent of its work force, to reduce administrative expenses.

Despite the growth, Goldman Sachs recently removed Aetna from its list of preferred stocks, saying it did not expect the company's shares to rise further.

Analyst Matthew Borsch said he still likes Aetna stock, but the company faces the possibility of pressure on insurance prices, particularly from not-for-profit competitors.