Aetna Quarterly Profit Down 65%

Aetna Inc. said Tuesday its fourth-quarter earnings fell 65% as higher medical costs cut into profits, but some analysts said the No. 1 U.S. health insurer is beginning to show signs of improvement.

The company, which has about 19 million health-care members in the United States, said fourth-quarter earnings from continuing operations dropped to $28.7 million, or 20 cents a share, from $81 million, or 55 cents, a year ago, as revenue fell about 1% to $6.6 billion.

The latest results beat the analysts’ consensus forecast of 16 cents compiled by First Call/ Thomson Financial.

Aetna said the medical loss ratio--a crucial industry measurement that compares medical costs, such as payment to doctors and hospitals, against revenue--rose to 87.2% in its commercial health-maintenance organization business from 84.8% a year ago.

Aetna, which is restructuring, also told analysts it expects 2001 earnings of $1.20 to $1.30 a share, a range that covers analysts’ average estimate of $1.25.

Aetna’s results exclude charges of $382 million relating to the write-off of goodwill mostly associated with Medicare market exits, restructuring plans and costs related to the sale of its international and financial services businesses to Dutch financial services giant ING Groep last month.

With the sale, Aetna became purely a health insurer, dental, group insurance and related benefits, as well as a large case pensions unit.It has taken steps to tackle problems, iincluding plans to cut 5,000 jobs, or 13% of its work force.

The company, which has posted sluggish financial growth recently even as its managed-care peers have enjoyed robust profits amid premium price increases, said the medical loss ratio in its Medicare HMO business was 97.5% in the quarter, significantly higher than a year earlier.

Aetna’s total health membership stood at 19.3 million as of Dec. 31, a 6% decline during the year. Membership increased by 81,000 from the third quarter but is expected to decrease in 2001 because of largely planned attrition at the company’s Prudential Health Care business and Medicare HMO and commercial HMO product market exits.

Aetna shares fell $1.05 to $38.95 on the New York Stock Exchange.