Coventry Beats Zacks Estimate

• By Zacks Equity Research
• On 4:07 pm EDT, Friday October 30, 2009

Coventry Health Care, Inc. (NYSE: CVH - News) reported third quarter earnings of 66 cents per share, which was above the Zacks Consensus Estimate of 54 cents. The company earned 73 cents in the year-ago quarter.

Total operating revenues for the reported quarter increased 17.8% to $3.44 billion from the previous year's $2.92 billion.  Revenues from managed care premiums rose 20% to $3.15 billion, while revenues from management services decreased to $290.9 million from $298.4 million a year earlier.

Due to reduced commercial risk and commercial management membership, total enrollment in Coventry plans increased 0.55% to 5.24 million members, mainly on gains in the Medicare D prescription drug program. The membership in that program increased 81,000 from the prior quarter.

Total operating expenses for the quarter came in at $3.29 billion, up 18.6% from the year ago quarter. Medical costs, the major operating expense component, rose to $2.66 billion from $2.20 billion last year. The medical loss ratio for the quarter (the proportion of premium revenue spent on providing medical care) reduced to 84.4 % from 86.4%.

For the quarter, Coventry Health displayed continued growth in all Medicare products, with Medicare Coordinated Care Product (CCP) membership rising 38% from the third quarter of 2008. The commercial group risk premium yields rose to $304.13 per member per month in the quarter, which reflected a 6.1% increase from the year-ago quarter.

Coventry ended the quarter with $1.71 billion cash and cash equivalents. Furthermore, Coventry exited the quarter with $1.71 billion in long-term debt. Coventry raised its fiscal 2009 earnings guidance to $2.01-$2.03, from the prior guidance of $1.85-$1.95 per share. The guidance excludes the impact of the First Health Services Corporation (FHSC) divestiture.

Coventry operates as a managed healthcare company in the United States. The company operates local health plans that serve markets primarily in the Mid-Atlantic, Midwest and Southeast United States. The company competes with big players like Aetna Inc. (NYSE: AET - News), Unitedhealth Group, Inc. (NYSE: UNH - News) and WellPoint Inc. (NYSE: WLP - News).

Currently we are Neutral on Coventry shares.

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