(Bloomberg) — Aetna Inc., the third-biggest health insurer by sales, raised its full-year forecast, helped by a surge in Medicare and Medicaid premiums and medical claims that were lower than the company anticipated.
Profit for 2013 may be $5.50 to $5.60 a share, Aetna said today in a statement. The Hartford, Connecticut-based carrier had forecast earnings of at least $5.40 a share in January. Excluding costs for its acquisition of Coventry Health Care Inc., first-quarter earnings were $1.50, 12 cents higher than the average of 18 analyst estimates compiled by Bloomberg.
Aetna joined larger U.S. health insurers UnitedHealth Group Inc. and WellPoint Inc. in reporting first-quarter results that beat analyst estimates. The industry has benefited for years from slow growth in medical costs as Americans cut back on care amid economic concerns.
“That Aetna beat consensus meaningfully in the first quarter should surprise no one at this point,” wrote Carl McDonald, a New York-based Citigroup analyst, in a note to clients today. “Almost every company that has reported thus far has benefited from lower utilization” of medical services.
Aetna cited rising revenue from private versions of Medicare, the U.S.-backed program for the elderly, and Medicaid, which covers poor Americans. The company’s total membership in medical plans rose 2.1% to 18.3 million.
The company rose 1% to $56.70 in New York trading at 9:42 a.m. Through yesterday, the shares had gained 28% in the past 12 months.
Coventry update
Aetna agreed to buy Coventry for $5.6 billion last year, to expand its Medicare and Medicaid offerings. The deal is expected to close by the middle of 2013, Aetna has said.
CEO Mark Bertolini, on a call with analysts today, said the insurer has all the required approvals from U.S. states and is awaiting a blessing from the federal Justice Department for the deal.
First-quarter net income declined 4.1% to $490.1 million from $511 million a year earlier as costs rose along with the higher membership, Aetna said in its statement. Per- share earnings rose to $1.48 from $1.43 after the insurer bought back 3.7 million shares in the quarter for $184 million.
So far this year, insurers have been helped by “a combination of better industry price discipline and continued moderate utilization,” said Matthew Borsch, a Goldman Sachs Group Inc. analyst in New York, in an April 17 note to clients.
UnitedHealth, the biggest health insurer, is based in Minnetonka, Minnesota; WellPoint, No. 2 in the industry, is based in Indianapolis.
