(Updates with CEO’s comments in fifth paragraph, closing shares in seventh.)
Dec. 12 (Bloomberg) -- Aetna Inc., the third-biggest U.S. health insurer, predicted 2014 profit that would fall below analysts’ estimates, as the company deals with 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 in a regulatory filing in advance of an investor conference today. Including those items, the forecast would be $5.82 a share, below the $6.22 average of 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 Dec. 10 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. Chief Executive Officer Mark Bertolini told analysts at the conference that sales may very well be higher, given strong Medicare Advantage sales that the company is still tallying.
Amortization costs will amount to 43 cents next year, a spokeswoman, Cynthia Michener, said in a telephone interview. Aetna also maintained its projection for 2013 earnings of $5.80 to $5.90 a share.
Aetna fell 1.8 percent to $65.14 at the close of New York trading. The shares have gained 41 percent so far this year.
The insurer has received 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.
Aetna is also expected to increase earnings next year with share buybacks of $1 billion to $2 billion, he said.
--Editors: Andrew Pollack, Bruce Rule