I believe that many Wall Street analysts and institutional investors decided some years ago that the insurance / benefits business is a dead man walking (inflation, angry customers, angry public, hostile regulators, etc). For that reason they are watching closely to detect the early sign that signals the end.
The ACA is the realization of one of the threats to the business model and clearly intensifies the concerns already felt for this sector.
These stocks have tended to rise prior to each quarterly earnings announcement. A quarter that is on guidance or favorable to it, is regarded as a "one off" and immediately its stock tends to slump. This is due to profit taking. As earnings information emerges over the next several weeks, investors get back in. I believe this has been the pattern for many quarters for most of the big companies. This theory would also rationalize why the stocks do not take off after a strong quarterly report.
However, if the quarterly report is a negative miss, that is often interpreted as evidence that confirms the end is near - selling follows, and the stock drops even more--as we just saw.
This theory also suggests why the insurance stocks rise and fall together - they are all viewed the same way.
Why would any big investor buy or hold these stocks? Because historically they have been gradually appreciating - counter to the long term expectation. And because quarter-to-quarter, they have exhibited this rise-and-fall pattern.
Hana, I think that the miss is one thing and the failure to communicate it is another. In 2008, when Hemsley realized he had a miss coming, he issued two or three downward revisions in the space of a month or two. This new CEO at AET seems to have issues around managing expectations. UNH seems to deliver, quarter after quarter, you have to give Hemsley a hand here... He seems to be doing a great job. AET will recover over the next few months... I think they are the Goldman Sachs favorite... Our rush at the barricades of $60 may have to wait a few weeks. I haven't watched WLP and AET as closely as UNH but the other day I noticed how aggressive their buy backs are. I think WLP has bought back over 40% of the company over the last 5 years... At some point that has to provide some traction. Good luck Steve