Aetna operating earnings decrease by 38% in third-quarter 2009

Aetna (NYSE: AET) today announced third-quarter 2009 operating earnings of $308.2 million, or $.69 per share, a 38 percent decrease from the prior-year quarter. Operating earnings exclude net realized capital gains (losses) and other items. The decrease in operating earnings per share from the prior-year quarter reflects a lower Commercial underwriting margin and a previously announced increase in pension expense partially offset by the impact of a lower number of shares outstanding year-over-year. The lower Commercial underwriting margin was due to a significant increase in Commercial medical costs which was partially offset by an increase in health care premiums. Net income was $326.2 million, or $.73 per share, a 26 percent increase from the prior-year quarter, which included net realized capital losses of $.48 per share due to the then-deteriorating global economic conditions.

"Our third-quarter financial results reflect a Total Medical Benefit Ratio that is in line with expectations despite a Commercial Medical Benefit Ratio that was higher than projected," said Ronald A. Williams, chairman and CEO. "The higher-than-expected Commercial MBR was due primarily to greater-than-anticipated costs from the H1N1 flu and COBRA penetration rates.

"We expect in 2010 that ongoing uncertainty about the U.S. economy with respect to employment and growth will continue to impact provider and member behavior as well as customer preferences. Despite this uncertainty, we continue to have a great deal of confidence in our long-term future, given our well-positioned, diverse portfolio of businesses, our customer-focused strategy and our underlying financial strength.”

Williams continued: "Looking ahead, as the health care reform debate intensifies, we will continue to be an active, constructive voice for a bipartisan solution that gets and keeps everyone covered, builds on the strengths of the employer-based system, and addresses the underlying cost and affordability of health care. We believe that the right reforms can yield positive, market based change that improves the health care system for more Americans."

Joseph M. Zubretsky, executive vice president and CFO, said, "The increase in net income in the third quarter was primarily a result of improved valuations in our investment portfolio. Going forward, we expect that our ongoing medical cost management and pricing action plans will have a noticeable effect beginning in the first quarter of 2010, with additional financial impact realized during the remaining three quarters of the year. As we work through the challenges facing us, our financial position, capital structure and liquidity remain strong and we are committed to making sure our operating expense structure is appropriately aligned with the size, profile and needs of our customers.”