Aetna Inc. (AET), the third-biggest U.S. health insurer, predicted 2014 profit higher than analysts’ estimates, as improving commercial pricing will help offset Medicare cuts from President Barack Obama’s health overhaul.
Aetna projected earnings of at least $6.25 a share in 2014, not counting amortization and other one-time items, the Hartford, Connecticut-based company said today in a regulatory filing in advance of its annual investor conference scheduled for tomorrow. Analysts had predicted $6.22 a share on average for next year, according to 22 estimates compiled by Bloomberg.
Aetna is grappling with funding cuts to Medicare Advantage, the industry’s version of the government program for the elderly, as well as new taxes imposed by the Patient Protection and Affordable Care Act known as Obamacare. The insurer still has kept profit margins steady on its commercial plans for large employers, Ana Gupte, a Leerink Swann & Co. analyst in New York, said yesterday in a note to clients.
“We expect commercial margins to be resilient in 2014,” Gupte wrote. In Medicare plans, “Aetna, which priced for share gains in 2013 by significantly lowering both premiums’ and out-of pocket maximums, is seen pricing conservatively in 2014.”
The company forecast sales of $53 billion next year, less than the average analysts’ estimate of $55.6 billion. It also maintained its projection for 2013 earnings of $5.80 to $5.90 a share.
Aetna fell 1.2 percent to $66.30 at the close of New York trading before the filing was released. The shares have gained 43 percent this year.
The insurer has gotten a boost from its $8.7 billion acquisition this year of Coventry Health Care Inc., which increased its business from government-financed insurance programs. The deal appears likely to be more profitable than Aetna originally predicted, said Brian Wright, a New York-based analyst at Monness Crespi Hardt & Co., in a Dec. 6 research note.
The insurer is also expected to increase earnings next year with share buybacks of $1 billion to $2 billion, he said.
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