Insurer Issues Profit Warning

HARTFORD, Conn. (AP) _ Aetna warned Tuesday that second-quarter earnings may be well below Wall Street expectations due to rising medical costs at its health maintenance organizations.

The company’s stock tumbled 13 percent in early trading after sliding 6 percent on Monday amid reports that Aetna was nearing a deal to sell its financial services and international businesses to ING Group of the Netherlands.

In Tuesday’s warning, Aetna predicted that second-quarter profits will total just 85 cents to 95 cents per share.

Industry analysts surveyed by First Call/Thomson Financial had estimated Aetna would earn about $1.20 per share for the quarter.

The company, which is scheduled to report its official quarterly results on Aug. 4, said HMO costs were between 10 percent and 12 percent higher compared with the same three-month period last year. Most of that came from rising use of services such as emergency room and outpatient care, the company said.

Costs also rose in the companies Prudential HMO and Medicare HMO businesses, Aetna said.

``While our current-period information is not complete, we wanted to alert our shareholders to this rise in medical costs,’’ said Aetna’s chairman and chief executive officer, William H. Donaldson.

``We are highly focused on actions we are taking to address the underlying causes of these higher costs and to offset their impact on our customers and on earnings going forward,’’ he said.

Aside from administrative cost-cutting, Aetna is looking at beefing up its ``on-site’’ consultations on medical practices, and planning to demand premium increases for health plans that renew in the fourth quarter. The company also said it might retool plans to use ``tiered co-pays’’ in a bid to impact demand for medical service.

In morning trading on the New York Stock Exchange, Aetna was down $9.06 per share at $57.563.

Meanwhile, Aetna’s board was reported to be considering the ING deal over the weekend. The Wall Street Journal and The Hartford Courant reported last week that ING was again the leading candidate to buy the Aetna businesses despite the collapse of exclusive talks in June.

The Courant, citing analysts, said a delay in announcing any agreement may be due to the complexity of the deal, which Aetna wants to structure so that it minimizes the tax consequences.

``It wouldn’t be shocking if that can hold up a deal for three days,’’ said Ken Abramowitz of Sanford C. Bernstein & Co.

Aetna and ING have refused to comment on the reports.