Aetna posts 4th-quarter profit in line with Wall Street consensus

Managed care provider Aetna Inc. said Thursday its fourth-quarter profit rose 3 percent from membership growth, premium and fee rate increases and continued cost cuts.

Net income grew to $448.4 million, or 87 cents per share, from $434.1 million, or 80 cents per share, a year ago. Excluding items, profit totaled 88 cents per share in the latest period.

Revenue rose 12 percent to $7.14 billion from $6.36 billion a year ago.

Per-share profits matched expectations of analysts polled by Thomson Financial, though revenue came in below the anticipated $7.17 billion.

The company's combined medical-loss ratio, which measures the amount of money spent on services compared with the amount of payments collected, widened to 80.3 percent for the fourth quarter from 78.8 percent in the 2006 period.

Fourth-quarter total medical membership increased organically by 168,000. Including Goodhealth Worldwide's 58,000 members, total medical membership at Dec. 31 was 16.85 million members compared with 16.61 million at Sept. 30 and 15.43 million a year ago.

Aetna forecast first-quarter adjusted earnings of 92 cents per share and 2008 profit of $4, while Wall Street expects 94 cents per share and 2008 earnings per share of $4.03.

Shares fell $1.32, or 2.5 percent, to $51.96 Thursday.

For 2007, Aetna reported revenue of nearly $27.6 billion, up 9.8 percent from $25.1 billion in 2006. Net income was $1.83 billion, or $3.47 a share, up 7.6 percent from $1.7 billion, or $2.99 a share.

Ronald Williams, chief executive, told analysts in a conference call the company expects between 550,000 and 600,000 new members in the first quarter of 2008, which would double growth of 300,000 that previously was projected.

For 2008, Aetna expects between 800,000 and 850,000 new members in its medical insurance, more than the 650,000 that had been projected.

"We believe our operating model gives us the flexibility to adapt to a changing political environment and a slowing economy," Williams said.

Joseph M. Zubretsky, chief financial officer, said Aetna tempered its membership outlook for the year beyond the first quarter.

"We think our guidance for '08 contemplates a slowing economy," he said in an interview.

Dave Shove, an analyst at BMO Capital Markets in New York, said Aetna performed well.

"This was a difficult economy and here you have a company that's growing its earnings well into double-digits," he said. "To achieve that I think is pretty good."

However, despite its projection of more members, Aetna did not raise its earning guidance.

Shove said Aetna is reacting to a loss of $40 million, or 8 cents per share, due to falling interest income in short-term investments.

"Keeping the guidance is a hedge against that kind of activity," he said.

Aetna's management also is "historically conservative with guidance," he said.

___

AP Business Writer Jennifer Malloy.