Aetna Posts 3rd-Period Loss of $54.4 Million

Hartford, Conn.--Aetna Inc. on Wednesday reported a third-quarter loss after medical costs rose faster in the last year than the company could raise premiums and shed unprofitable customers.

Aetna, the nation’s largest health insurer, lost $54.4 million, or 38 cents a share, compared with net income of $176.8 million, or $1.24 a share, a year earlier. Analysts on average had expected a loss of 55 cents in the latest quarter. Revenue declined 8.3% to $6.19 billion.

The insurer’s medical costs climbed from a year earlier after Aetna relaxed health-care restrictions that had angered patients and doctors. Aetna is raising premiums, dropping about 2 million unprofitable customers in employer health plans and exiting Medicare markets where it contends it can’t make money.

Shares of the Hartford, Conn., company fell 77 cents to $31.24 after dropping as low as $28.60.

Aetna’s commercial health maintenance organizations paid out 90.1 cents in medical costs for every premium dollar they collected in the quarter, up from 87.4 cents a year earlier. Medical costs consumed 92.9 cents of every dollar in Medicare markets where Aetna will continue operating, up from 92.5 cents a year earlier. However, the cost figures in the latest period were lower than in the second quarter of 2001, when Aetna lost $95.9 million.

“This quarter was better than last quarter. That’s the story here,” said John Rowe, Aetna’s chairman and chief executive. “We’re in a turnaround mode. This is about what we deliver and not what we promise.”

Aetna’s medical costs as a percentage of premium dollars were higher than its rivals’. For example, UnitedHealth Group Inc.’s third-quarter medical loss ratio for employer HMOs was 84.1%, Cigna Corp.’s was 85.4%, and Oxford Health Plans Inc.’s was 76.5%.