ANTM Anthem Inc

By Anna Wilde Mathews and Kimberly Chin 

Anthem Inc. raised its 2019 earnings outlook after its profit rose in the first quarter, continuing a trend of strong managed-care results despite investors' concern about policy issues, including some Democrats' discussion of universal government coverage.

The insurer said it now expects per-share profit to be greater than $18.27 for 2019, up from its previous forecast of greater than $18. Analysts polled by Refinitiv expect full-year earnings of $17.88 a share. Profit rose 18% in the first quarter, lifted by higher revenue from solid membership growth and lower selling, general and administrative expenses.

In Anthem's government segment, the company flagged "elevated medical cost experience in some states" in the Medicaid business, and also said a dropoff in operating gain compared with last year's quarter was tied to some adjustments that had boosted the 2018 Medicaid numbers.

Still, analysts at J.P. Morgan wrote in a note that "the modest 'noise' in the numbers pales in comparison to the political risk that has been discounted into the stock" so far this year.

Health-care stocks have been hit in recent days by worries over policy options being debated in Washington, notably the idea of a single-payer Medicare for All system that could supplant health insurers.

Rival UnitedHealth Group Inc. discussed its views on the downside of such government-coverage initiatives during its earnings call last week, and the comments may have inadvertently reinforced the concerns of some investors despite the company's strong results.

Analysts say health-care investors are concerned about potential policy overhang on the sector, including the effects of single-payer rhetoric as well as of policy makers' focus on drug rebates and the potential return of a suspended health-insurance industry tax.

In a research note, Height Securities suggested that "it is unlikely the pressure from Medicare-for-all proposals will subside soon," noting an upcoming House hearing on the topic.

Shares of Anthem were up slightly at about $251 in midday trading.

Anthem, on its call with analysts, didn't focus on the policy debate over expansion of government coverage, nor did it talk about the hot-button subject of drug rebates. Anthem did say it wouldn't force self-insured employers using its new pharmacy-benefit manager to pass along rebates to individual consumers taking the affected drugs.

Referring to the self-insured employers, Chief Executive Gail Boudreaux said, "We're prepared to support their desired approach." For its fully insured business, Anthem said it would move to pass along rebates to individual consumers next year.

The process of launching the new PBM, IngenioRx, is going smoothly, Ms. Boudreaux said, and Anthem plans to begin migrating members on May 1.

For the quarter, Anthem said net income was $1.55 billion, or $5.91 a share, up from $1.31 billion, or $4.99 a share, in the comparable quarter a year ago. Analysts polled by Refinitiv were expecting $5.53 a share. Anthem reported adjusted earnings of $6.03 a share for the quarter, beating analysts' estimates of $5.81 a share. Total revenue jumped 9.4% to $24.67 billion from a year ago. Analysts were expecting $24.28 billion.

(END) Dow Jones Newswires

April 24, 2019 13:16 ET (17:16 GMT)

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