Back in February, Aetna
Several factors have played a role in this turnaround, one being an impressive third quarter. On Oct. 26, Aetna announced that its operating earnings, excluding prior-period favorable reserve development, surpassed its year-ago quarter by 34%. Third-quarter net income was $0.85 per share, a 37% increase over the prior-year quarter. Because of the strong results, the company was able to revise its full-year forecast for its operating EPS to $2.83 from previous guidance of $2.77-$2.79. Ronald A. Williams, Aetna's chairman and CEO, sees another big year in 2007 as well. He noted, "Looking ahead, we believe that 2007 will be yet another year of increasing profitability and growth for Aetna. We project our operating earnings per share to increase by 15% to $3.26."
Other key strategic decisions that Aetna made during the third quarter to enable the turnaround in its stock price included a share repurchase, aggressive marketing, and streamlining its operations. Aetna repurchased 27.4 million shares at a cost of $973 million during the third quarter. Year to date, it has repurchased 51.6 million shares at a cost of $1.96 billion. This has lowered the company's diluted share count by more than 6% since the end of last year.
Its aggressive marketing campaigns have added more than 700,000 members in the past year. The company also made the decision during the third quarter to "right-size" its workforce. Aetna laid off 650 employees -- or 2% of its personnel -- in October, in an attempt to trim administrative costs. The company also has begun to pass rising medical costs on to the consumer, as it attributed premium and fee rate increases as playing a factor in its strong third-quarter earnings.
Since Tuesday's midterm elections, some analysts have raised concerns about the implications of a Democrat-led Congress. Aetna and other insurers, such as WellPoint
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