(By Salman - iStockAnalyst Writer)Aetna Inc. (NYSE: AET), the third largest diversified healthcare provider by enrollments, is scheduled to release its third quarter earnings before the market open on Thursday, October 29, 2009.  Analysts, on average, currently expect the company to report a net loss of 66 cents a share on revenue of $8.68 billion. In the year ago quarter, the company reported earnings of 58 cents per share on revenue of $7.98 billion.

Aetna Inc. operates as a diversified health care benefits company primarily in the United States. The company provides health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life, and disability plans, as well as medical management capabilities and health care management services for Medicaid plans. It operates in three segments: Health Care, Group Insurance, and Large Case Pensions. In FY2008, 93% of Aetna's revenue came from its sale of Health Care, both on a private and employer-funded basis.

The severe economic recession has impacted health insurers like Aetna Inc. as employers have cut jobs and slashed the number of people covered by employer-sponsored group health insurance. Few companies, particularly small businesses, have dropped health coverage entirely. Uncertain job outlook and and weak job market has also hurt company's business.

Late in July, the Hartford, Connecticut-based company reported a 28% decline in profit for the second quarter, hurt mainly by higher commercial medical costs, as well as lower-than-projected Medicare revenue. Second-quarter net income declined to $346.6 million from prior year's net income of $480.5 million. Earnings per share plunged 21% to $0.77 from $0.97 last year. On an adjusted basis, the company's second-quarter operating earnings fell 34% to $308.5 million from $466.3 million a year ago, and operating earnings per share dropped 28% to $0.68 from $0.94 in the year-ago quarter. Total revenue in the quarter grew to $8.671 billion from $7.828 billion in the same period a year ago. Excluding net realized capital gains, revenues were $8.658 billion, up 10% from last year's $7.850 billion. Analysts on average expected the company to report earnings of $0.78 per share on revenue of $8.56 billion.

The company's enrollment climbed 9 percent to 19.052 million members in the second quarter, from 17.499 million members in the year ago quarter.

On a segmental basis, second-quarter revenues from Health Care, which provides insured and self-insured medical, pharmacy, dental and behavioral health products and services, rose 11% year-over-year to $8 billion. Revenues from Group Insurance, which includes group life, disability and long-term care products, were $545.2 million, up from $495.8 million last year, while revenues were $535.7 million excluding net realized capital items, higher than last year's $503.8 million.

In July, the company slashed 2009 operating earnings target range to $2.75 to $2.90 a share, down from a prior estimate of $3.55 to $3.70 a share. However, the guidance appears too conservative.

Health insurance stock prices have remained volatile in past few months amid concerns over health care reform debate in Washington, D.C. Investors and analysts fear that a government-run insurance program also called public option, would grab market share from private insurance companies, and will hurt the bottom line Aetna and other managed care companies. Meanwhile, there has also been talk of higher taxes on expensive healthcare plans that could cut into their profit margins and lower earnings going forward. Shares of health insurers have also witnessed heightened activity in recent times amid concerns over high flu-related costs.

Among other developments, Aetna Inc. announced late July that it has entered into an agreement to acquire Horizon Behavioral Services LLC from its parent company, Psychiatric Solutions Inc. (NASDAQ: PSYS), for about $70 million. Headquartered in Lewisville, Texas, Horizon Behavioral Services is a provider of Employee Assistance Programs to many mid-sized and large employers.

In terms of stock performance, Aetna shares are down almost 13% since the beginning of the year. Shares of the company fell 74 cents or 2.83% to  $25.44 in afternoon trade on Wednesday.

Disclosure: Author doesn't own any of the stocks discussed here.