Bloomberg News

Aetna Lifts Forecast After Quarterly Profit Beats Estimates

October 27, 2011

(Updates with closing share price in the fifth paragraph.)

Oct. 27 (Bloomberg) -- Aetna Inc., the third-largest U.S. health insurer, raised its 2011 earnings forecast after lower- than-expected demand for medical care boosted quarterly results.

Full-year profit probably will be $5 a share, Hartford, Connecticut-based Aetna said in a statement. In July, the insurer projected $4.60 to $4.70. Third-quarter earnings excluding certain items of $1.40 a share beat by 25 cents the estimate of 18 analysts surveyed by Bloomberg.

Aetna joined UnitedHealth Group Inc. and WellPoint Inc., the biggest U.S. health insurers, this month in lifting their outlooks for the year. Medical spending and consumer demand were less than Aetna projected as Americans, facing unemployment topping 9 percent, delayed treatments. Aetna said 2012 earnings will be at least $4.80 a share.

“Expectations had been low for Aetna in 2012,” said Dave Windley, an analyst at Jefferies & Co. in Nashville, Tennessee, in an e-mail. “This guidance will be a positive relief.”

Aetna rose 5 percent to $40.83 at the close in New York, the biggest single-day gain in six weeks. The shares have gained 34 percent this year.

The insurer is looking for possible acquisitions that would enable the company to increase its Medicare, Medicaid and commercial businesses, Chief Financial Officer Joe Zubretsky said in a telephone interview. Medicare is the U.S. health plan for the elderly and disabled and Medicaid is the joint state- federal program for low-income Americans.

New Areas

“Scale is important and we already have very good scale in Medicare,” Zubretsky said. “We would still be interested in growing inorganically to spread out into new geographic areas.”

Aetna isn’t interested in takeovers involving health technology as it is absorbing acquisitions made over the past five years, he said. Small health plans may be targeted, the CFO said.

“It was a really strong quarter,” said Jason Gurda, an analyst at Leerink Swann in New York. “Earnings were well ahead on lower utilization and pricing discipline.”

Net income fell 1.4 percent to $490.4 million, or $1.30 a share, from $497.6 million, or $1.19, a year earlier, Aetna said today in a statement. The company bought back 12.8 million shares in the quarter, helping boost per-share results.

Enrollment Declines

Enrollment declined by 11,000, compared with an average drop of 112,000 over the previous six quarters, Gurda said. UnitedHealth, based in Minnetonka, Minnesota, and Indianapolis- based WellPoint both reported member increases in the quarter.

Aetna’s 2012 forecast was less than the consensus analyst estimate of $4.87 a share, and below what the company is projecting for 2011.

“2012 guidance assumes a higher level of health-care utilization, so it’s largely expected to be lower,” Gurda said in an e-mail. “Aetna has been very conservative with its guidance.”

The company is the first of the major insurers to provide a 2012 forecast.

UnitedHealth, the largest U.S. health insurer by sales, on Oct. 18 said earnings for 2011 will be $4.40 to $4.45 a share. WellPoint, the largest by enrollment, yesterday said that net income for this year will be $7.18 to $7.28 a share.

--Editors: Bruce Rule, Andrew Pollack

To contact the reporter on this story: Pat Wechsler in New York at

To contact the editor responsible for this story: Reg Gale at

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