Anthem sees big jump in quarterly profit, but misses analyst expectations

Indianapolis-based Anthem Inc.on Wednesday reported fourth-quarter earnings that fell just short of expectations, and its shares dipped nearly 5% in morning trading.

The health care insurer’s earnings more than doubled, to $934 million, in the quarter, compared with $424 million in the same quarter of 2018.

Adjusted results came to $3.88 per share while operating revenue climbed 16 percent, to $27.13 billion.

Analysts expected earnings of $3.90 per share on $26.85 billion in revenue, according to Zacks Investment Research.

For the year, the company reported profit of $4.81 billion, on $103.14 billion in revenue.

Anthem started the new year by forecasting earnings that are below analyst predictions even as the health insurer books gains from a new business.

The Blue Cross-Blue Shield insurer expects earnings adjusted for one-time items to be greater than $22.30 per share in 2020. That includes income from IngenioRx, a pharmacy benefits management business it launched ahead of schedule this year.

Analysts on Wall Street expect earnings of $22.72 per share, according to FactSet.

Anthem CEO Gail Boudreaux had said last fall that the company expected core, adjusted earnings to grow near the low end of a goal of 12% to 15%.

Jefferies analyst David Windley called the forecast issued Wednesday disappointing. Windley said in a research note that he thought that Boudreaux’s prediction implied a 2020 forecast of around $22.70 per share, counting any gains from IngenioRx.

Anthem runs insurance plans in several states, including big markets like California, New York and Ohio. It covers 41 million people as the nation’s second-largest insurer.

Enrollment grew nearly 3% in the final quarter of 2019, helped by gains from the company’s Medicare and Medicaid business of 14% and 8%, respectively.

Medicare is the federal government’s coverage program mainly for people age 65 and over, while Medicaid is a state-and-federally funded program that focuses on the poor. Anthem, like other insurers, is counting more on these programs for growth as the market for commercial coverage matures.

Anthem said it also was helped in the quarter by the launch of IngenioRx, which contributed to a $535 million operating gain from the insurer’s commercial and specialty business. That total jumped nearly 70% jump compared with the final quarter of 2018.

Boudreaux told analysts Wednesday morning that the company expects to grow its new business, especially among its health insurance customers who went elsewhere for pharmacy benefits because they didn’t have a competitive option through Anthem.

“We’re seeing real big opportunities for us both in 2020 as well as in 2021,” she said.

Anthem started enrolling patients in IngenioRx, which the company started with help from CVS Health Corp., in last year’s second quarter.

The insurer also saw its largest expense, the cost of benefits, jump 13%, to $21.38 billion, in the fourth quarter.

Anthem shares traded at $277.73 each late Wednesday morning, down 4.3% on the day.

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