Aetna Forecasts 2013 Earnings Growth Below Estimates

Aetna Inc. (AET), the third-biggest U.S. health insurer by membership, forecast earnings for 2013 that were less than analysts’ estimates, as carriers brace for growing medical costs and weak enrollment.

Earnings excluding one-time items will be at least $5.40 a share, while revenue will rise about 9 percent to $38.6 billion, Aetna said yesterday in a filing. Analysts had predicted $5.52 a share and $38.91 billion, according to the averages of estimates compiled by Bloomberg. Aetna, based in Hartford, Connecticut, will hold its annual investor meeting today in New York City.

UnitedHealth Group Inc. (UNH), the biggest insurer by enrollment, and Cigna Corp., the fourth largest, each forecast profit below analyst estimates during the last month. Both predicted rising costs to treat members while Cigna also cited weak employment growth in the U.S. The companies’ outlooks may be conservative, said Dave Shove, a BMO Capital Markets analyst in New York.

Aetna expects medical costs will rise at the same rate as this year “despite ongoing proof of slowing growth,” Shove said in a note to clients. The forecast reflected “management’s cautious stance on guiding high.”

Yesterday’s guidance also excludes the impact from Aetna’s $5.6 billion purchase of Coventry Health Plans Inc., expected to close next year. While the forecast was below estimates, it may still be stronger than what some investors were expecting, said Matthew Borsch, a Goldman Sachs Group Inc. analyst in New York, in a note.

Shares Rise

Aetna gained 3.2 percent to $45.91 at the close in New York. The company’s shares have increased 8.8 percent this year.

The insurer reiterated its 2012 earnings forecast of $5.10 a share.

At a Nov. 14 investor conference, Chief Financial Officer Joseph Zubretsky said the economy will be a drag on the business next year. The company doesn’t expect employment to grow next year, he said, making it difficult to add members.

The insurer anticipates ending this year with about 18.2 million members, with enrollment remaining unchanged through the first quarter of 2013. By year-end, membership will increase to about 18.4 million, Aetna said in the filing.

Aetna is projecting commercial medical costs will rise next year about 6.5 percent, the same as this year.

Zubretsky said last month that Aetna would get a boost next year from share repurchases as well as an $800 million contract to cover retired teachers in Texas. In August, the insurer announced its Coventry purchase, saying it wanted to expand sales in government-backed Medicare and Medicaid plans.

UnitedHealth is based in Minnetonka, Minnesota and Cigna (CI) in Bloomfield, Connecticut. Indianapolis-based WellPoint Inc. (WLP) is the second-biggest insurer.

To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net