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UPDATE 4-UnitedHealth sees more growth in 2017 when it exits Obamacare

* UnitedHealth raises 2016 earnings forecast

* Third-quarter revenue rises 11.6 percent to $46.29 bln

* Shares jump nearly 7 percent (Adds Obamacare analyst quote, insurer shares)

By Caroline Humer and Ankur Banerjee

Oct 18 UnitedHealth Group Inc, the largest U.S. health insurer, on Tuesday raised the possibility of stronger profit growth in 2017 as it exits the government-subsidized insurance market commonly known as Obamacare, encouraging investors who have been negative on the sector.

The company said losses in that business were within expectations in the third quarter, news that boosted the recently weak shares of competitors like Anthem Inc, which plan to stay in those markets next year.

Shares of UnitedHealth, which beat Wall Street third-quarter earnings estimates, raised its full-year outlook and signaled 2017 earnings could also top analyst expectations, surged over 7 percent.

Earlier this year UnitedHealth said it would pull out of most of the individual insurance business created under U.S. President Barack Obama's national healthcare reform law because it was unable to make money on the plans.

Other insurers including Aetna Inc and Humana Inc are also largely exiting, citing too low enrollment, too high medical costs and structural issues including the design of risk payments and rules related to enrollment.

UnitedHealth shares were last up 6.5 percent at $142.91 while Anthem gained 3 percent. Aetna added 2.4 percent, Cigna 2.2 percent and Humana 1.4 percent.

The insurers were boosted by UnitedHealth's positive tone about much of the insurance business, which follows a lot of worries among investors about the individual exchanges, Leerink analyst Ana Gupte said.

UnitedHealth reported losing $200 million on the Obamacare business in the third quarter, where it has 770,000 enrollees on the exchanges and 210,000 in similar plans sold outside the government marketplaces.

Chief Executive Stephen Hemsley said 2017 earnings could beat Wall Street expectations if the company ends 2016 with strong financial growth. Analysts expect 2017 earnings of $9.07 per share, according to Thomson Reuters I/B/E/S.

The company also expects 2016 adjusted net earnings of about $8.00 per share, versus a previous view of $7.80-$7.95 per share.

Revenue from its Optum business, which manages drug benefits and offers healthcare data analytics services, rose 9 percent to $21.1 billion in the third quarter.

The company said medical costs were as expected. The amount it spends on medical claims compared with the insurance premiums it brings in fell 60 basis points to 80.3 percent.

UnitedHealth, which sells employer-based insurance as well as Medicare and Medicaid, said third-quarter net profit rose to $1.97 billion, or $2.03 per share, from $1.60 billion, or $1.65 per share, a year earlier.

Excluding items, the health insurer earned $2.17 per share, beating the average estimate of $2.08, according to Thomson Reuters I/B/E/S.

Total revenue rose to $46.29 billion from $41.49 billion.

Up to Monday's close, the company's shares had gained about 14 percent this year, compared with a 3.7 percent decline in the S&P 500 healthcare index. (Reporting by Ankur Banerjee in Bengaluru and Caroline Humer in New York; Editing by Shounak Dasgupta and Meredith Mazzilli)

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