Health insurers Aetna (AET) and Humana Inc. (HUM) reiterated their respective earnings forecasts for both the second quarter and full-year, after shares of health insurers skidded following the sharp cut in forecast by Coventry Health Care, Inc. (CVH) for the second quarter and full-year.
Following the announcement, shares of Coventry Health Care plunged more than 20% and caused a major sell off in health insurance stocks. As a result, despite reaffirming the outlook, Aetna stock is down $2.13 or 5% and currently trading at $40.47. Shares of Humana fell $2.36 or 5.31% to trade at $42.08.
The Hartford, Connecticut-based Aetna said Thursday it is reaffirming its second-quarter operating earnings guidance of $0.93 per share, which came in below the consensus estimate of $0.94 per share of thirteen Wall Street analysts polled by First Call/Thomson Financial. In the year-ago quarter, Aetna earned $0.83 per share on an operating basis that excludes net realized capital gains/losses and other items.
Aetna still expects full-year 2008 operating earnings to be $4.00 per share. Street analysts predict earnings of $4.01 per share. Last year, the company reported operating earnings of $3.49 per share.
The company said that projected operating earnings per share for the full-year 2008 exclude $38.0 million after tax of net realized capital losses for the three months ended March 31, 2008. Commenting on the guidance, CFO Joseph Zubretsky, said, "The medical cost trend we are experiencing in the second quarter is in line with our expectations to date and consistent with our prior guidance of 7.5 percent, plus-or-minus 50 basis points. We will provide updated information on our second-quarter earnings call on July 31."
In a separate press release, Humana Inc. (HUM) also reiterated its earnings guidance for the second quarter and full-year 2008. The company still expects second-quarter earnings in the range of $1.15 - $1.20 per share and full-year earnings in the range of $4.10 - $4.35 per share. Street analysts expect earnings of $1.18 per share for the second quarter and $4.30 per share for the full-year.
Humana's CFO, James Bloem, said, "Our medical claim reserving methodology has consistently given consideration to differences in provider claim receipt patterns among our various product lines. Analysis of medical claims payments and receipts through May 2008 indicate no adverse prior period development for either full year 2007 or first quarter 2008 medical claims estimates."
Surging healthcare costs, in the background of a slowing economy, is taking a toll on the bottom line of insurers. In 2007, health care spending in the United States reached $2.3 trillion, and was projected to reach $3 trillion in 2011 and is projected to reach $4.2 trillion by 2016. In the scenario, medical costs, led by prescription drugs and hospital stays, are absorbing major chunk of revenue from health insurers.
On June 18, Coventry Health Care lowered its second-quarter earnings outlook to a range of $0.55 - $0.57 per share from its prior guidance of $1.03 - $1.04 per share. The company said it now expects revenue of $2.95 billion to $3.00 billion for each quarter of the fiscal year 2008. Previously, the company said it expected second quarter revenue of $2.95 billion to $3.10 billion. Analysts polled by First Call / Thomson Financial currently expect the company to earn $1.04 per share on revenue of $3.07 billion for the second quarter.
Coventry Health Care also cut its full-year 2008 earnings guidance to a range of $3.65 - $3.75 per share from its prior guidance of $4.39 - $4.50 per share. The company also lowered its full year revenue outlook to a range of $11.800 billion - $12.045 billion from its previous outlook of $11.99 billion - $12.49 billion. Analysts currently expect the company to earn $4.43 per share on revenue of $12.31 billion for the full year 2008.
In April, WellPoint (WLP) lowered its fiscal 2008 forecast and now expects net income in the range of $5.42 - $5.67 per share, including net realized investment losses of $0.06 per share. Earlier, earnings forecast was $5.76 - $6.01 per share. Analysts expect earnings of $5.49 per share.
Another insurer UnitedHealth Group, Inc. (UNH) also lowered its full-year 2008 outlook by 10% or $0.40 per share to a range of $3.55 - $3.60 per share, Wall Street analysts estimate fiscal 2008 earnings of $3.57 per share.
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December 26, 2025 08:42 ET Third quarter economic growth data from some major economies including the U.S. were the main news in this holiday shortened week. GDP growth and industrial production data from the U.S. helped to boost morale, while the consumer confidence survey results were less upbeat. In Europe, the quarterly economic growth data from the U.K. drew attention, while the minutes of the Australian central bank’s latest policy session was in focus in Asia.