Aetna cuts full-year earnings forecast, shares sink

By Lewis Krauskopf

NEW YORK (Reuters) - Health insurer Aetna Inc (AET.N) cut its 2009 forecast on Tuesday, citing higher projected medical costs for its commercial business serving employers and lower revenue from its Medicare plans for seniors.

Shares of the No. 3 U.S. health insurer fell 7 percent after the announcement.

The company forecast operating earnings in a range of $3.55 to $3.70 per share, excluding items. It previously forecast $3.85 to $3.95 per share for the year.

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.

"Unfortunately, we overestimated the amount of revenue we were going to collect," Zubretsky said.

On the medical cost side, Zubretsky said the company saw a continuation of a problem it cited in its first-quarter report in April -- use of more services at health-care facilities such as hospitals and clinics.

Aetna has been seeking to implement programs to manage medical costs, but Zubretsky said it was no longer including benefits of such actions in its outlook.

"We're confident in the success of these programs, (but) we are no longer including the incremental benefit," Zubretsky said.