Aetna Earnings Beat Expectations on Wall Street

Aetna Inc., one of the nation’s biggest insurers, on Wednesday reported second-quarter earnings that beat Wall Street forecasts, boosted by continued improvement in its health-care operations.

Aetna, which is selling its domestic individual life insurance business for $1 billion to Lincoln National Corp., said earnings in its retirement services and international operations each rose at least 10% in the quarter.

While profit in its U.S. Healthcare managed-care unit fell 21% in the quarter from a year earlier, industry analysts said that was misleading because Aetna took a $103-million charge in the third quarter of 1997 when it became aware of higher-than-expected medical costs in prior periods.

Aetna’s health-care business earned $104.6 million in the latest quarter, up from $100.5 million in the first quarter, and investors and analysts welcomed the improvement.

“While Aetna U.S. Healthcare is by no means out of the woods, the fundamentals are now turning positive in the core commercial plan and should continue to improve . . . due to premium increases and medical-cost control,” Prudential Securities said in a research report.

Aetna, based in Hartford, Conn., said net income rose to $265.7 million, or $1.69 a share, from $230.1 million, or $1.43 a share, a year earlier.

Operating earnings, excluding gains or losses on investments, equaled 95 cents a share, down from $1.27 a share a year earlier, but above forecasts of 91 cents a share, according to First Call Corp., which tracks analysts’ estimates.

Wall Street welcomed the results, and Aetna’s stock jumped $4.63 to close at $69.75 in consolidated New York Stock Exchange trading.

Aetna has changed from a diversified insurer to a managed-care-driven company since the $4.1-billion sale of its property-casualty business to Travelers Group Inc. in April 1996 and its U.S. Healthcare acquisition three months later.

Total sales rose to $4.8 billion in the quarter from $4.6 billion. Net capital gains rose to $112.7 million from $24.3 million a year earlier.