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Anthem shares jump after acquisition, improved forecast

October 25, 2017

Anthem Inc. exceeded Wall Street third-quarter profit expectations and pushed its 2017 forecast higher, as the health insurer continued to sell more coverage to Medicare customers and employers who need more than just benefit management.

The Indianapolis insurer also announced the acquisition of America’s 1st Choice, a private health insurance company that provides services to about 135,000 senior members in Florida and South Carolina through Medicare Advantage plans.

Terms of the deal were not disclosed. The transaction is expected to close in the first quarter of 2018.

America’s 1st Choice operates Freedom Health Inc. and Optimum Healthcare Inc. in Florida and America’s 1st Choice of South Carolina. The Florida plans, which make up most of the business, reported more than $1.4 billion in premium revenue in 2016 and more than $10 million in profit.

Anthem shares jumped 5.7 percent Wednesday morning, to $206.58 each.

Anthem said Wednesday that it now expects full-year adjusted earnings to range between $11.90 and $12 per share after predicting greater than $11.70 per share in July. Analysts forecast $11.83 per share, according to FactSet.

The Blue Cross-Blue Shield insurer covers more than 40 million people as the nation's second-largest health insurer, and most of its business comes from private coverage sold to employers. One element of that segment stood out in the third quarter. The insurer saw enrollment climb more than 3 percent, to nearly 15.9 million people, in its "local group" business.

That segment includes employer-sponsored coverage for companies with less than 5,000 people. This is generally a more profitable business for insurers like Anthem than larger clients who pay their own medical bills and hire an insurer to manage the coverage.

Anthem's Medicare enrollment also climbed more than 4 percent, to 1.5 million, and the insurer also was helped by a drop in expenses tied to its failed bid to acquire rival insurer Cigna.

Overall, the Indianapolis insurer's earnings climbed 21 percent, to $746.9 million, and earnings adjusted for one-time items totaled $2.65 per share. Excluding investment gains and one-time items, operating revenue rose 4.6 percent, to $22.1 billion.

Analysts expected earnings of $2.41 per share on $22.43 billion in revenue, according to Zacks Investment Research.

 

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