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Aetna warns on 1Q
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April 10, 2001: 10:17 a.m. ET
Insurer cites higher medical costs, says full-year forecast in question
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NEW YORK (CNNfn) - Aetna Inc. warned Tuesday that first-quarter earnings will be lower than expected and that it can't confirm its previous forecast for full-year 2001 results. The company blamed increased medical costs due to greater use of health-care services.
The Hartford, Conn.-based insurer did not provide a revised first-quarter figure, but analysts on average were expecting the company to earn 28 cents a share, according to earnings tracker First Call.
The company also said it cannot confirm the $1.20 to $1.30 a share earnings it projected for 2001. Analysts on average are expecting 2001 earnings of $1.24 a share.
 Aetna (AET: down $6.24 to $29.91, Research, Estimates) said it expects to record $90 million of additional medical costs before taxes related to services performed in prior periods. Nearly half that amount was related to the company's exit from the Medicare market, Aetna said. The charges also reflect commercial HMO medical costs.
The company will be recorded as a nonrecurring item in its first quarter earnings statements. Aetna also said HMO medical costs are running "considerably higher" in the first quarter than previously projected.
Group insurance, large case pensions and non-risk businesses are performing consistent with expected levels, Aetna said.
"These continued increases in medical costs are clearly unacceptable and do not reflect the positive potential of Aetna," Chairman John Rowe said.
Aetna beat fourth-quarter expectations in January though profits declined more than 65 percent from the year-ago quarter as the company recorded nearly $400 million in restructuring charges.
A large part of the restructuring charges came in December, when Aetna trimmed 5,000 jobs, about 12 percent of its work force, as it struggled with rising medical costs. 
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