Aetna 4Q profit up 4 percent

Health insurer Aetna Inc. said Thursday its fourth-quarter profit increased 4 percent as growing medical enrollment _ including a push to sell individual policies in addition to more traditional companywide plans _ lifted revenue from 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 rose 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.

Aetna shares tumbled $1.07, or 2.4 percent, to close on the New York Stock Exchange at $42.93.

Prudential Equity Group LLC analyst David Shove downgraded the stock to neutral weight from overweight. He said in a report that Aetna's outlook appears solid but not robust, adding he expects that the company will be one of the nationwide insurers that doesn't meet its growth targets.

Sally Rosen, managing senior financial analyst at A.M. Best in Oldwick, N.J., said Aetna's earnings report was generally favorable, with membership and revenue growing.

"There were no surprises and it didn't seem negative," she said.

However, Aetna reported a rise in its commercial loss ratio, the cost of claims compared with premiums, Rosen said.

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'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, Williams said.

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

In addition to its long-standing policy of serving business customers that buy health insurance for employees, Aetna is offering health insurance plans to individuals. In 2006, it nearly doubled its individual customers, among them self-employed workers, from 100,000 to 190,000.

Aetna said Thursday it expects to nearly double the number of states in which the plans are available, from 16 states now to 31 by the end of the year.

"The application of the process is really bearing fruit and working well," Williams said.

Looking ahead, 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.

For 2006, revenue was up by 12 percent, to $25.1 billion from $22.5 billion in 2005.

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

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.

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