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Anthem Buys America's 1st Choice, Expands in Medicare Market

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Anthem, Inc. ANTM has sealed the acquisition of America’s 1st Choice, a privately held, for-profit Medicare Advantage (MA) organization.

Financial terms of the transaction were kept under wraps and the transaction is expected to be slightly accretive to earnings in 2018.

Positives for Anthem

America’s 1st Choice is a perfect fit for Anthem given its vast presence in Florida, a state which houses a large retiree population.

Anthem should benefit from America’s 1st Choice’s proprietary technology tools, managerial processes and member engagement programs that deliver efficient, cost-effective health care services to its members.

The acquisition aligns with Anthem’s long-term strategy to grow in the thriving Government business. The deal will allow the company to serve more than 130,000 members in Florida.

Share Price Performance

In a year’s time, the stock has surged 42%, outperforming the industry’s growth of 38%. Given its progress on fundamentals and strong recent results the rally in the stock should stay alive.

Industry Trend

Medicare Advantage, a private version of the government-sponsored health insurance for retirees that provides extra benefits and services to seniors, has been in huge demand from the rising population of baby boomers.

A number of acquisitions small and big have materialized as the players have been scrambling to grow in this line of business. Some of the notable ones are Cigna Corp.’s CI acquisition of HealthSpring and UnitedHealth Group Inc. UNH buyout of XL Health Inc.

The failed mergers of Anthem Inc. with Cigna Corp. and Aetna with Humana Inc. HUM were also aimed at expanding the Medicare Advantage business.

Our Take

This deal comes as no surprise to us given Anthem’s desire to grow in the lucrative MA business. This deal will help especially after its blocked merger with Cigna, which would have made it one of the largest players in the MA market.  

The company recently acquired HealthSun, one of the fastest-growing integrated Medicare Advantage health plans and health care delivery networks in Florida.

The company is aggressively seeking to put its capital to use and is readily open to attractive acquisitions. We expect to hear more from the company along these lines.

Anthem carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

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Cigna Corporation (CI) : Free Stock Analysis Report
 
Humana Inc. (HUM) : Free Stock Analysis Report
 
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
 
Anthem, Inc. (ANTM) : Free Stock Analysis Report
 
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