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Aetna 4Q profit plunges
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January 30, 2001: 1:19 p.m. ET
Insurer is hurt by rising medical costs but still beats Street forecasts
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NEW YORK (CNNfn) - Aetna Inc., the leading U.S. health insurer, reported a 65 percent plunge in fourth-quarter operating profit Tuesday as rising medical expenses cut into the bottom line, but the company still managed to beat lowered Wall Street forecasts.
The report marks the Hartford, Conn.-based company's first quarterly results since selling its international and financial services units to Dutch-based ING Group for $7.7 billion. Following the deal, Aetna announced several restructuring initiatives designed to boost its core health insurance business, including plans to slash about 5,000 jobs, or nearly 13 percent of its work force, to cut costs.
Aetna earned $28.7 million, or 20 cents a share, excluding special items in the October-December period, down from $81 million, or 55 cents a share, in the 1999 fourth quarter. The lower results still managed to beat the First Call consensus estimate of 16 cents per share.
 The latest results do not include $381.9 million in special charges associated with the restructuring plan, write-offs associated with the company's withdrawal from certain Medicare markets, and one-time costs related to the ING deal.
Including those one-time costs, the company posted a net loss of $353.2 million, or $2.49 per share.
Fourth-quarter revenue dipped to $6.6 billion from $6.7 billion in the 1999 period. The HMO medical cost ratio -- a key industry measure that gauges medical costs versus revenue from premiums -- worsened to 87.2 percent.
"Our efforts to improve our business are well under way, and we are making considerable progress on our strategic initiatives," Aetna President and CEO John W. Rowe said in a statement.
In a conference call with analysts, the company said expects 2001 earnings of $1.20-to-$1.30 a share, a range that covers the analysts'
consensus estimate of $1.25.
The earnings report provided no mention of reported settlement talks with HMO members who contend that Aetna and other insurers have engaged in fraud and racketeering by using undisclosed financial incentives to doctors that limit medical care. According to published reports, Aetna has been in advanced talks with plaintiffs' lawyers about a potential settlement.
Shares of Aetna (AET: Research, Estimates) slipped 85 cents to $39.15 in afternoon Tuesday. While the stock has edged up about 21 percent from its 52-week low of $32.93, Aetna shares still significantly lag behind other managed care stocks as the company struggles to improve its financial performance.
Aetna had 19.3 million members as of Dec. 31, a 6 percent decline from 1999 levels. 
-- from staff and wire reports
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