Aetna shares tumble after slashing outlook

Aetna (AET), whose shares have climbed more than 20 percent over the past month, plunged in after-hours trading after slashing its 2009 operating earnings guidance.

The Hartford-based company expects to earn profit of between $3.55 to $3.70 per share, down from $3.85 to $3.95, Analysts consensus forecasts were for $3.80, according to Thomson Reuters.

"The primary drivers of the revised guidance are: a continuation of higher projected commercial medical costs; and lower projected 2009 Medicare revenue, reflecting an updated view of the risk profile of the Medicare book of business," Aetna said in a statement.
The company simply overestimated the amount of revenue it could collect, as Reuters noted.

"As Aetna prepared its Medicare bids for next year, data indicated that the insurer would receive about $100 million less revenue for 2009 than it previously expected, Chief Financial Officer Joseph Zubretsky said in an interview," the news service said,

Last year, Aetna was as one of the few health insurers not to slash earnings expectations. That changed in April when Aetna surprised investors by reporting higher-than-expected commercial unit medical costs. At that time, the company had affirmed its 2009 guidance.

Dow Jones noted that Goldman Sachs analyst Matthew Borsch argued then that Aetna's peak-level margins weren't sustainable, given industry-wide margin deterioration in 2008. He also noted that market-share gains at least partly reflected an "aggressive pricing posture," the news service said.

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