(Reuters) – Anthem Inc. (ANTM.N) reported a quarterly profit that exceeded Wall Street's estimates on Wednesday, helped by lower costs in the commercial insurance business. The company raised its guidance for adjusted full-year earnings.
The health insurance hymn's office building seen in Los Angeles, California on FEBRUARY 5, 2015 / Gus Ruelas
The expense ratio of the insurer – the expenses of an insurer for claims against the premiums it earned – narrowly missed the consensus estimate of 84.7 percent by the Evercore ISI broker.
However, the ratio improved in the quarter to 84.8 percent compared to 87 percent in the same period last year.
Anthem expects the ratio to be 84.2 percent for the full year, an improvement from the previous forecast of 84.4 percent.
Michael Newshel, an analyst at Evercore, said in a statement that concerns over the small-scale failure of the quarterly ratio could be mitigated by the reduced provisioning forecast.
With healthcare spending doubling in spending cuts, Anthem's rival, Aetna Inc. (AET.N) and Cigna Corp. (CI.N) have signed multi-billion dollar contracts for merger with performance managers at the pharmacy separately.
However, Anthem has decided to internally operate its pharmacy use business in 2020. Then it will start managing billions of patient prescriptions to cut costs.
In the third quarter, total membership decreased by 753,000 members from 40.3 million members in the same period last year as the company continues to leave its business in Obamacare and lose members purchasing its Medicaid health plans for low-income members.
Medicare membership, which targets older people and people with disabilities, grew nearly 18 percent to 1.77 million year-on-year. This was reinforced by the acquisition of Anthem by health insurer HealthSun and America's 1st Choice.
Anthem said it now expects full-year adjusted earnings in excess of $ 15.60 per share, compared to its previous forecast of over $ 15.40 per share.
Net income for the third quarter ended September 30 was $ 960 million, or $ 3.62 per share. Excluding items, the company earned $ 3.81 per share, outperforming the average analyst estimate of $ 3.70 per share.
Total revenue increased 3.7 percent to $ 23.25 billion, exceeding the analyst's average estimate of $ 22.94 billion.
Reporting by Aakash Jagadeesh Babu and Tamara Mathias in Bangalore; Editing by Arun Koyyur