Aetna, Hartford, Conn., said its second-quarter profit fell 1.4% to $389.5 million, down from $394.9 million in the year-ago quarter, amid higher medical costs and competitive pressures. Revenue rose 14% to $6.25 billion. During a conference call with analysts, Aetna President and Chief Executive Officer Ronald Williams said he expected the cost and pricing pressures to continue for the rest of the year, but "We are bringing our full capability and resources to address these issues." Still, the insurer raised its 2006 projection for earnings per share to between $2.77 and $2.79, from an earlier projection of between $2.74 and $2.76.
Aetna's commercial medical cost ratio, a key measure of operating performance, rose to 81.4% in the second quarter from 78.9% in the year-ago quarter. Aetna blamed heightened competition in the small-group market in much of the East Coast; unexpectedly large claims in its stop-loss business, which covers certain patients with particularly high medical bills; and high-dollar claims from a government account. Enrollment reached 15.4 million, a 7% increase over the year-ago quarter but down 11,000 members from the first quarter. Aetna now expects 700,000 to 750,000 new medical members during all of 2006, down from a prior forecast of 900,000 to 1 million new members.