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Aetna 4Q Profit Sinks 49 Percent, Medical Costs Climb

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File photo of a doctor wearing a stethoscope. (Photo by Joe Raedle/Getty Images)

File photo of a doctor wearing a stethoscope. (Photo by Joe Raedle/Getty Images)

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HARTFORD, Conn. (AP) – Aetna’s fourth-quarter net income sank 49 percent as higher medical costs squeezed profitability for the insurer’s commercial health coverage, and several one-time expenses chipped away at the bottom line.

The Hartford, Conn., company said Thursday the amount it paid in medical claims grew more than 9 percent in the quarter to $6.12 billion as a rise in flu-related expenses countered a drop in use when Superstorm Sandy swept up the East Coast last fall.

Aetna also booked an after-tax charge of $78 million tied to the settlement of litigation over its payment of health care providers outside its network. It recorded another hit of $32.2 million because it retired some debt early and a $24.1 million charge for severance costs.

The insurer also had nearly $13 million in costs related to its acquisition of Medicaid and Medicare coverage provider Coventry Health Care, a $5.7 billion deal Aetna announced about a month before the fourth quarter started.

All told, the insurer earned $190.1 million, or 56 cents per share, in the three months that ended Dec. 31. That’s down from $372 million, or $1.02 per share, in the 2011 quarter.

Excluding the charges and capital gains, the insurer earned 94 cents per share. That fell short of average analyst expectations of 97 cents per share, according to FactSet.

Total revenue climbed 16 percent to $9.93 billion due largely to a one-time pension premium. Excluding that and other one-time items, revenue grew 5 percent to $8.96 billion, while analysts expected $8.89 billion.

Aetna Inc. is the third-largest commercial health insurer based on enrollment, trailing WellPoint Inc. and UnitedHealth Group Inc. Health insurance is Aetna’s main product, but the company also sells dental, group life and disability coverage.

Aetna’s medical enrolment slipped 1 percent to 18.2 million compared to the final quarter of 2011.

The percentage of premiums Aetna spent on medical care for its commercial health insurance jumped to 83.4 percent in the fourth quarter from 79 percent in the 2011 quarter.

Aetna Chairman and CEO Mark Bertolini said earlier this month the insurer had seen a spike in flu intensity following two very mild seasons. But he still expects Aetna to spend about $40 million to $50 million on claims this season, which is within its normal range. This flu season has stirred worry among managed care investors about a rise in claims due to its early start and rapid spread.

For the full year, Aetna earned $1.66 billion, or $4.81 per share, on about $36.6 billion in total revenue. The insurer recorded adjusted earnings of $5.13 per share not counting the charges and capital gains.

For 2013, Aetna expects adjusted earnings of at least $5.40 per share. Analysts expect, on average, $5.53 per share.

Aetna also said Thursday that executive Shawn M. Guertin will replace Joseph M. Zubretsky as chief financial officer next month. Zubretsky will stay with Aetna to lead the insurer’s newly created national businesses segment, which includes its national accounts and specialty products like behavioral health.

Guertin has served as the head of Aetna’s finance business and worked for nearly five years as chief financial officer and treasurer of Coventry before joining Aetna in 2011.

(© Copyright 2013 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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