Aetna Inc., one of the biggest U.S. health insurers, said Thursday that second-quarter net income fell on higher medical costs and slashed its membership forecast, sending its shares sharply lower.
The results stunned the market for the second quarter in a row and again dragged down the sector.
"It wasn't a full-fledged disaster, but it was pretty close," CIBC analyst Carl McDonald said in a research note titled "Deja Vu."
Aetna cut its full-year forecast for membership growth to between 700,000 and 750,000 from a prior outlook of 900,000 to 1 million. The reduction stemmed from lower-than-projected enrollment for its small-customer segment.
At the same time, the Hartford, Conn.-based company said a key barometer for costs would come in worse than expected for the full year. It cited expensive claims -- including from hospitalization costs, tied to two accounts -- as well as competition in its small-customer segment.
"They have lowered their enrollment guidance pretty sizably and are being hit by higher-than-expected claims," said Williams Capital Group analyst Beth Senko. "That is surprising."
Aetna's net income declined to $389.5 million, or 67 cents a share, from $394.9 million, or 65 cents, a year earlier, when there were more shares outstanding.
Aetna posted operating earnings of 64 cents a share, excluding a 1-cent gain for reserves from prior periods. Analysts on average expected 63 cents, according to Reuters Estimates.
Revenue increased 14% to $6.3 billion.
Aetna cited competitive pressures among its smaller customers in the Northeast and mid-Atlantic regions and Florida.
Aetna shares closed down $6.71, or 16.8%, at $33.25. They earlier fell to $31.01, their lowest level since January 2005.