Insurer Anthem Hikes 2015 Forecast, 2Q Earnings Climb

Anthem has pumped up its 2015 forecast again after earnings jumped more than 17 percent in its most recent quarter, helped by a surge in government money.

The Blue Cross-Blue Shield carrier now expects 2015 adjusted earnings to top $10 per share, which is up from an upgraded forecast in April to greater than $9.90 per share.

Analysts expect earnings of $10.04 per share, according to FactSet.

Anthem Inc. grew to become the nation’s second-largest health insurer by selling commercial coverage in key markets like California and New York, but lately it has been staking more of its future growth on government business. The company administers the state-and-federally funded Medicaid program in several states, and it also provides Medicare Advantage coverage as well as insurance for federal employees.

Medicaid, which helps cover the poor and people with disabilities, has become a ripe area for growth. Several states are expanding eligibility for the program as part of the health care overhaul, the federal law that is expanding insurance coverage to millions of people.

Anthem’s revenue from government business grew about 26 percent to $10.4 billion in the second quarter and made up more than 52 percent of the company’s total operating revenue. An acquisition helped that growth.

Medicaid enrollment surged nearly 20 percent to about 5.8 million people, compared to last year’s quarter, and company leaders told analysts to expect more.

“We believe our experience and footprint positions us very well to continue our growth as we help states address the challenges of rising health care costs and improving quality for their residents,” CEO Joseph Swedish said during a conference call to discuss results.

Overall, the insurer’s second-quarter net income jumped to $859.1 million from $731.1 million. The Indianapolis company had said last week that its adjusted earnings totaled $3.10 per share in the quarter.

Operating revenue, which excludes investment gains, climbed 8.4 percent to $19.76 billion in the quarter.

That topped analyst expectations for $19.66 billion.

Anthem shares edged up 19 cents to $154.39 in Wednesday morning trading while broader indexes also started off nearly flat. Before Wednesday, the insurer’s stock had already climbed 23 percent so far this year while the Standard & Poor’s 500 index has been flat.

Anthem’s earnings report comes a few days after it laid out a $48 billion plan to purchase fellow insurer Cigna Corp., the latest multi-billion dollar deal to drop in an industry where the main players are scrambling to get bigger. Aetna Inc., the nation’s third-largest health insurer, also plans to spend about $35 billion Medicare Advantage provider Humana Inc.

Medicaid coverage provider Centene Corp. will spend about $6.3 billion on fellow insurer Health Net Inc.

Insurers say these combinations can help them save money by cutting overlapping costs and quickly improve their technology, which is becoming more important in monitoring patient health and helping customers find care. The acquisitions also are a way to quickly push into new markets and in some cases gain negotiating leverage over care providers, who also have been growing bigger in recent years.

The end result of all these deals for the average consumer is murky. These combinations could affect premiums and customer service, but that will depend largely on how it changes an insurer’s share of the market where the customer lives.

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