Anthem profit beats on lower medical costs; raises forecast
(Adds share price, details on Obamacare)
By Ankur Banerjee and Michael Erman
April 25 (Reuters) - Anthem Inc reported a stronger-than-expected first- quarter profit on Wednesday as it kept a tight leash on medical costs, prompting the health insurer to raise its full-year profit forecast.
Shares in the company, which halved the number of markets where it will offer Obamacare individual plans in 2018, rose 1.3 percent in morning trading.
Anthem was able to hold medical costs down across all of its segments, and said its reduced Obamacare footprint helped. It said it had 755,000 individual market customers in the first quarter, down from around 1.6 million the end of the year.
Anthem said its benefit expense ratio - which measures how much it spends on claims per dollar of premiums it earns - improved to 81.5 percent from 83.7 percent in the same period a year ago.
Piper Jaffray analyst Sarah James said the lower costs could be evidence of changes under new Chief Executive Gail Boudreaux, who joined the company late last year.
"This was a clean and positive quarter for Anthem," James added.
Boudreaux said the company would be opportunistic on M&A but suggested it would mostly focus on smaller opportunities rather than transformational deals.
The healthcare sector has been rapidly consolidating over the past year with companies looking for new ways to bolster profits as the industry faces greater scrutiny for rising costs.
Rival Aetna Inc struck a deal to be bought by pharmacy chain CVS Health Corp for $69 billion and Cigna Corp has proposed acquiring Express Scripts, the largest U.S. independent pharmacy benefit manager, for $54 billion.
Anthem last year announced a plan to launch an in-house pharmacy benefit management business in 2020.
Anthem's net income rose 30 percent to $1.31 billion, or $4.99 per share, in the first quarter ended March 31.
Excluding items, the company earned $5.41 per share, way above the average analyst estimate of $4.88, according to Thomson Reuters I/B/E/S.
Medical enrollment totaled about 39.6 million members at March 31, a fall of 2.5 percent, driven predominantly by the reduced Obamacare footprint.
Total revenue was largely flat at $22.54 billion.
The insurer said it expects 2018 adjusted net earnings to be greater than $15.30 per share, up from its previous estimate of earnings of greater than $15 per share.
Anthem shares opened up $5 at $230 on the New York Stock Exchange on Wednesday but subsequently traded at $226.18, up $1.18, or 0.5 percent.. (Reporting by Ankur Banerjee in Bengaluru and Michael Erman in New York; Editing by Maju Samuel and Dan Grebler)
