Aetna backs FY08 EPS outlook; sees lower FY09 profit - Update

(RTTNews) - Health insurer Aetna Inc. (AET | Quote | Chart | News | PowerRating) announced Monday morning that it is reaffirming its operating earnings forecast for the full-year 2008. The earnings guidance is currently falls in line with analysts' expectations. The company also updated its preliminary guidance on certain 2009 performance metrics and said its operating earnings per share would be slightly lower than fiscal 2008.

The company's Chairman and Chief Executive officer Ronald Williams revealed this while make a presentation on the company's forecast at the J.P. Morgan Healthcare Conference in San Francisco.

In a statement, Williams said, "Aetna's business fundamentals remain strong and we enter 2009 with what we believe will be industry-leading gains in membership despite the weakening economy."

The Hartford, Connecticut-based company reaffirmed its fiscal 2008 operating earnings guidance in a range of $3.90 to $3.95 per share, excluding one time items, and which is in line with sixteen Wall Street analysts' consensus estimate of $3.93 per share, polled by First Call/Thomson Financial. Analysts estimated earnings in the range of $3.90 to $4.03 per share. Analysts' estimates typically exclude special items.

Aetna's projected fiscal 2008 operating earnings per share include about $.15 per share of pension benefit.

Aetna noted that the projected operating earnings for the full-year 2008 exclude after tax $232.0 million of net realized capital losses. Additionally, operating earnings also exclude after tax $28.5 million related to the release of reserves for anticipated future losses on discontinued products.

The projected operating earnings per share exclude any future and net realized capital gains or losses and other items occurring after September 30, 2008, if any, from net income.

While reporting its third quarter results in end-October, Aetna lowered its fiscal 2008 operating earnings outlook to the current range of $3.90 to $3.95 per share from its prior estimate of $4.00 per share, citing lower net investment income in the fourth quarter than originally projected.

Looking ahead to fiscal 2009, Aetna currently backs its full-year 2009 preliminary operating earnings per share growth outlook to be 12% to 14%, excluding the expected increase in pension expense from last year.

However, the company expects fiscal 2009 operating earnings to include a pension expense of about $0.39 per share, reflecting a $0.54 per share increase from last year. The company had previously anticipated a year-over-year increase in pension expense in a range of $0.30 to $0.40 per share.

The company revealed that the steep increase in projected fiscal 2009 net pension obligation was due to the significant decline experienced in equity markets and interest rates during the full-year 2008.

Including the projected increase in pension obligation, Aetna anticipated full-year 2009 operating earnings per share to be slightly lower than fiscal 2008. Sixteen Wall Street analysts have a consensus earnings estimate of $4.09 per share for fiscal 2009.

Last month, the company revealed plans to reduce its workforce by about 1000 positions or less than 3% of the total 36,208 employees. Citing 'cost-cutting' actions as the need of the hour, the company said the move would help reduce administrative expenses and keep it on course to achieve estimated growth targets for 2009.

Following the workforce reduction, the company said it expects to record about $35 million, after tax, in restructuring charges in the fourth quarter of 2008.

Aetna assured that the job eliminations will not impair its ability to meet customer commitments and growth targets. Eligible employees would receive severance benefits based on length of service as well as outplacement and other support programs.

In its third quarter results announced in October, Aetna reported a 44% decline in third-quarter net profit, hurt by net realized capital losses, which resulted predominantly from declines in market value of some securities in the company's investment portfolio. However, operating earnings rose from last year and came in line with analysts' forecast.

Among Aetna's peers, Philadelphia-based Cigna Corp. (CI | Quote | Chart | News | PowerRating) cut its fiscal 2008 earnings outlook in November, citing bigger than expected loss from its death benefits business in the fourth quarter. However, the company reaffirmed its earnings outlook for the full-year 2009.

However, another peer, Louisville, Kentucky-based Humana Inc. (HUM | Quote | Chart | News | PowerRating) reiterated its fiscal 2008 earnings forecast in November, but earnings were expected below Street expectations.

Aetna is one of the nation's leading diversified health care benefits companies, serving members with information and resources to help them make better informed decisions about their health care. Aetna is serving over 37.3 million members.

Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life, long-term care and disability plans and medical management capabilities.

In Monday's regular trading session, AET is trading at $28.39, down $0.81 or 2.77% on a volume of 0.45 million shares. In the past 52-week period, the stock has been trading in a broad range of $14.21 to $59.43.

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