Shares of Aetna Inc. climbed Wednesday, a day after the nation's third largest health insurer issued its initial forecast for 2013.
THE SPARK: The Hartford, Conn., company said Tuesday after markets closed that it expects adjusted earnings, which excludes items like capital gains or losses, of at least $5.40 per share in 2013. That would represent about 6 percent growth from the $5.10 per share it forecasts for this year.
The insurer also said it expects revenue to grow 9 percent compared to the $35.5 billion it projects for this year. That would result in a total of about $38.7 billion, a figure that also excludes capital gains.
It says its medical membership should grow from 18.2 million people at the start of the year to 18.4 million by the end of 2013 and that medical cost growth will be relatively flat compared to this year.
THE BIG PICTURE: Aetna is the third-largest commercial health insurer based on enrollment, trailing WellPoint Inc. and UnitedHealth Group Inc. Health insurance is Aetna's main product. Much smaller parts of its business offer dental, group life and disability coverage.
The insurer said in August that it would spend $5.7 billion to buy Coventry Health Care, a Medicare and Medicaid coverage provider, in a deal expected to close in the middle of next year.
Aetna held its annual meeting with analysts and investors Wednesday in New York.
THE ANALYSIS: Analysts expect, on average, earnings of $5.52 per share on $38.93 billion in revenue, according to FactSet.
The company's forecast appears to fall short of Wall Street's expectations, but Citi analyst Carl McDonald said the comparison isn't clean. He said in a note to investors that some analyst estimates already factor in the Coventry acquisition while others, like Aetna, do not.
Goldman Sachs analyst Matthew Borsch said Aetna's initial forecast may be "a bit stronger" than some investor expectations.
Bernstein analyst Ana Gupte said in another note she was encouraged by Aetna's initial 2013 forecast, and she expects the insurer to benefit from both its commercial business and the Coventry deal.
SHARE ACTION: Up nearly 4 percent, or $1.74, to $46.22 in afternoon trading while the Standard & Poor's 500 index rose only slightly. The insurer's share price has climbed nearly 10 percent so far this year.