Aetna's projected profit next year is below Wall Street's expectations, but many are chalking up the estimate to the health insurer's historically conservative outlook.
At its investor conference in New York City Thursday, Aetna predicted (PDF) earnings per share would be “at least” $6.90 next year, down from the consensus estimate of $7.17. Aetna said revenue would likely top $62 billion. It also set a goal of $100 billion in revenue by 2020.
However, Aetna similarly entered 2014 with modest profit projections. And in each quarter so far this year, the insurer raised its earnings profile.
“While the initial read from (Wall) Street may be one of caution, we would suggest that the underlying guidance is consistent with Street expectations, especially when taking into account certain factors such as prior-year development,” Joshua Raskin, a Barclays Capital analyst, said in a research note. He added that Aetna's final profit results have beat the initial guidance in 10 of the past 11 years.
Aetna said membership will likely remain flat through the end of the first quarter of next year, totaling 23.4 million covered lives. The company will lose some people in its administrative services-only business, where self-insured employers contract with Aetna to perform administrative functions, as well as in Medicaid. Aetna shut down its Medicaid business in Delaware in October.
Medicare Advantage and Obamacare's public exchanges will offer some growth opportunities, the insurer said. Analysts estimate 1.1 million people will have an Aetna health plan next year through an exchange established by the Patient Protection and Affordable Care Act. Nearly all of Aetna's exchange plans are offered through federally run exchanges that use the HealthCare.gov website.
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