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Anthem boosts forecast after Q3 jump in earnings, revenue

October 31, 2018

Indianapolis-based Anthem Inc. beat Wall Street expectations and hiked its 2018 forecast again as the Blue Cross-Blue Shield insurer added more Medicare customers and continued to clamp down its biggest expense, benefit payouts, in the third quarter.

The nation's second largest health insurer now expects full-year adjusted earnings to be greater than $15.60 per share after hiking that forecast to greater than $15.40 in July.

Analysts forecast $15.50 per share, on average, according to FactSet.

Anthem's profit jumped 29 percent, to $960 million, in the three-month period ended Sept. 30 compared with the third quarter of 2017. Earnings adjusted for one-time gains and costs came in at $3.81 per share. Operating revenue, which excludes investment gains, grew 4 percent, to $22.98 billion.

Analysts had predicted earnings of $3.67 per share on $22.91 billion in revenue, according to Zacks Investment Research.

Anthem sells coverage in several states, including big markets like New York and California. Much of its business centers on providing employer-sponsored coverage for companies with fewer than 5,000 people. This is generally a more profitable business for insurers than larger employers who pay their own medical bills and hire an insurer to manage the coverage.

The insurer's enrollment in that business grew slightly, to 15.7 million people, while membership in Anthem's Medicare business jumped nearly 18 percent from last year's quarter, to almost 1.8 million people. That helped to counter a nearly 60 percent drop that pushed individual enrollment below one million people as Anthem pulled back from the Affordable Care Act's insurance marketplaces.

Anthem's largest expense, what it pays in benefits, was relatively flat at $18.18 billion after declining for consecutive quarters. Investment income rose and income taxes fell 24 percent, to $282 million.

Shares, up 18 percent this year, rose 3.4 percent in early trading Wednesday, to $274.62 each, amid an overall surge in the market.

Jefferies analyst David Windley predicted shares of Anthem would trade lower because the better-than-expected earnings performance stemmed from lower taxes and higher investment income.

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