) to overweight from neutral.
Analyst David Shove says on this morning's call, Aetna's chairman said the health-benefits company's strategy of covering the cost trend and expanding margin through general & administrative savings is a one-year strategy.
The chairman says heading into 2005, Aetna will return to a more conservative, stronger pricing strategy of pricing to cover the cost trend on a percentage basis, allowing for both underwriting margin expansion and general & administrative leverage. This should lift valuation to a more normalized national health-plan multiple of 13 times the forward EPS.
Shove upgraded on the comments, and Aetna's strong execution as shown in its second-quarter report. He upped the $87 target to $103.