Aetna Posts Fourth Straight Loss
Aetna Inc. continued to pay a high price for its status as the nation’s largest health insurer as it announced Thursday a fourth-quarter loss--its fourth straight quarter of red ink--that was worse than Wall Street analysts had expected.
The 148-year-old Hartford, Conn.-based company reported an operating loss of $84.6 million or 59 cents a share in the quarter, excluding charges related to layoffs and a restructuring announced in December. Aetna is trying to become a smaller, more profitable company after several costly years of enrollment growth and acquisitions that made it the biggest insurer.
The loss was in sharp contrast to one year ago when Aetna posted a profit of $28.7 million, or 20 cents a share. Its per share loss was deeper than the worst anticipated by analysts, which ranged from forecasts of 28 cents to 56 cents a share.
Revenue for the quarter was $6.04 billion, down 8.4% from $6.6billion in the same quarter of 2000.
Aetna’s top officials expressed optimism for the near future. “We have a smaller book of business and a more favorable economic outlook. We now enter 2002 positioned for profitability,” said Aetna Chairman and President John W. Roe.
After an initial plunge when the New York Stock Exchange opened Thursday, Aetna’s stock rallied to close up $1.62 at $33.50 for a gain of more than 5%.
Now, the company that had an enrollment of 19.5 million insured in January 2000, has perhaps already fallen from the top spot. Aetna announced that it had trimmed membership to 15.6 million in January and was pointing to enrollment cuts down to between 14.5million and 15 million by the end of the year.
At the very least, it seems to have fallen below the current No. 2 in enrollment, UnitedHealth Group. That company had 16.5million members at the end of 2001, according to the publication Managed Care Week.
Aetna is “a big ship and it’s a tough one to turn,” said Bear Stearns analyst John Rex. He and other analysts agreed that Aetna’s problems are considerable and won’t be easy to fix.
The consensus is that the company emphasized enrollment growth over profitability for too long, and also was slow to reduce its reliance on the traditional HMO model, when smaller and quicker competitors were rolling out a broad range of medical care products and turning away from pure HMOs. The traditional HMO model involved fixed payments per patient to doctors and hospitals, regardless of how much care they needed. That is being supplanted by more of a shared risk, fee-for-service model with higher payments.
Morningstar analyst Tom Goetzinger, said “Most managed-care companies reported strong fourth quarters. Aetna did not....Worse still, the excellent results of other providers like UnitedHealth Group and WellPoint Health Networks position those firms to take Aetna’s more profitable members.”
Most health insurers, according to Kirby Bosley, a principal in the Los Angeles office of William M. Mercer, “are working very hard to diversify their [coverage] portfolios and moving away from traditional HMO offerings.”
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Times wire services were used in compiling this report.
