Anthem profit beats as insurer reins in costs

Anthem profit beats as insurer reins in costs

Anthem Inc reported quarterly profit that topped analysts' estimates on Wednesday on lower medical costs and the No.2 U.S. health insurer raised its full-year adjusted earnings forecast.

The office building of health insurer Anthem in seen in Los Angeles, California
The office building of health insurer Anthem in seen in Los Angeles, California February 5, 2015. REUTERS/Gus Ruelas

REUTERS: Anthem Inc reported quarterly profit that beat Wall Street estimates on Wednesday, helped by lower costs at its commercial insurance business and the company raised its full-year adjusted earnings forecast.

The insurer's benefit expense ratio - an insurer's spending on claims against the premiums it earns - narrowly missed the consensus estimate of 84.7 percent by brokerage Evercore ISI.

However, the ratio improved to 84.8 percent in the quarter from 87 percent in the year-ago period.

Anthem said it now expects the ratio for the full year to be around 84.2 percent, an improvement from its prior forecast of 84.4 percent.

Evercore analyst Michael Newshel said in a note that any worries about the small miss in ratio for the quarter could be tempered by the lowered forecast for benefit expense.

As the health insurance industry doubles down on ways to tighten spending, Anthem's rivals Aetna Inc and Cigna Corp have separately signed multi-billion dollar deals to merge with pharmacy benefit managers.

However, Anthem has decided to take its pharmacy benefits business in-house in 2020, when it will start managing billions of dollars of patient prescriptions in a bid to cut costs.

In the third quarter, total membership fell by 753,000 members from 40.3 million members in the year-ago period, as the company continues to exit its Obamacare business and lost out on members buying its Medicaid health plans for low-income members.

However, membership in its Medicare business, which caters to the elderly and people with disabilities, rose nearly 18 percent to 1.77 million from a year earlier, boosted by Anthem's acquisitions of health insurers HealthSun and America's 1st Choice.

Anthem said it now expected full-year adjusted earnings forecast to be more than US$15.60 per share, up from the prior forecast of over US$15.40 per share.

Net income rose to US$960 million, or US$3.62 per share, in the third quarter ended September 30. Excluding items, the company earned US$3.81 per share, beating the average analyst estimate of US$3.70 per share, according to Refinitiv data.

Total revenue rose 3.7 percent to US$23.25 billion, beating the analyst average estimate of US$22.94 billion.

(Reporting by Aakash Jagadeesh Babu and Tamara Mathias in Bengaluru; Editing by Arun Koyyur)

Source: Reuters

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