While its larger competitors, WellPoint Inc. and United Health Group, were battered in the first quarter by rising health care costs and declining membership, Aetna Inc. escaped largely unscathed.
Although shares of the Hartford-based insurer have been punished along with the industry leaders — they’re down more than 25 percent for the quarter — the company’s first quarter results reported Apr. 24 had far fewer red flags than the earnings statements turned in by the big boys, whose shares fell even more steeply.
Aetna, which employs more than 7,000 in Connecticut, reported operating income of 92 cents per share, matching Wall Street’s expectations. The company also reaffirmed its 2008 outlook for adjusted earnings per share of $4 and even raised its estimate for medical membership growth by 50,000 to a range of 850,000 to 900,000 members.
Costs Soar
That’s a far cry from WellPoint and United Health, which disappointed analysts on many levels.
Indianapolis-based WellPoint, which owns Blue Cross plans in 14 states and is the market leader, lost $10 billion in market capital on a single day, March 11, after it told analysts it was enrolling fewer customers than it expected and saw unanticipated claims costs.
Its profit fell 25 percent in the first quarter, and it lowered its earnings guidance for the year by roughly 30 cents per share.
Meanwhile, Minnetonka, Minn.-based UNH, which employs nearly 4,000 in Connecticut, is the nation’s No. 2 managed care company with revenues of $75 billion. It reported quarterly net income of $994 million, or 78 cents per share, two cents below analysts’ expectations.
UNH’s medical-care ratio, a key cost measure, rose to 81.5 percent, over the guidance level of 80.5 percent. And hundreds of thousands of commercial plan members are expected to leave this year.
During a recent UNH earnings conference call, analysts were boiling. “Do you have the right team in place?” asked Cheryl Skolnic of CRT Capital Group.
CEO Stephen Hemsley said the company had not executed well.
Travelers raises guidance
Meanwhile, in the property/casualty insurance industry, Travelers reported quarterly net income of $967 million, compared with $1.1 billion in the 2007 quarter. But due in part to the effects of a stock buyback program, operating income per fully diluted share actually rose 4 percent for the quarter.
Travelers also raised its guidance for operating income per diluted share for the year by about 10 cents a share.
The Hartford Financial Group will be reporting earnings this week. It has scheduled an earnings conference call for Tuesday, April 29.
The other major news in the property/casualty industry last week was Liberty Mutual Group’s announcement of plans to acquire Safeco Corp. for $6.2 billion. The deal would create the nation’s fifth largest property/casualty insurer and a formidable competitor to The Hartford, which employs 13,000 in Connecticut, and Travelers, which has about 6,500 employees here.
Liberty Mutual, which is owned by its policyholders, said it plans to pay for Safeco with cash and by issuing as much as $1.5 billion in debt. Liberty Mutual has about 480 employees in Connecticut, while Safeco has nearly 200.
Wire reports were included in this article.
