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Analysis

Ahead of IngenioRx Launch, Anthem Produces Strong Revenues and Raises Guidance

By Jack O'Brien  
   April 24, 2019

The Indianapolis-based insurer beat its estimates and experienced solid membership growth in Q1.

Anthem Inc. achieved an adjusted earnings per share (EPS) of $6.03, exceeding estimates, while operating revenues rose 9.2% year-over-year, according to the company's Q1 earnings report released Wednesday morning.  

The Indianapolis-based insurer followed a strong finish to 2018 with an equally robust showing at the start of 2019, with $24.4 billion in operating revenues and 40.8 million enrolled medical members, an increase of 905,000.

The company's operating EPS and adjusted EPS for Q1 were $5.91 and $6.03, respectively, which both topped estimates.

Most of the conversation on the company's quarterly earnings call centered around the launch of IngenioRx, which replaces the PBM contract Anthem had with Express Scripts that expired on March 31.

Related: Anthem Releases Q4 2018 Earnings Report, IngenioRx to Launch in Q2

Gail Boudreaux, CEO of Anthem, said on the conference call that she expects to begin transitioning members over to IngenioRx next week while moving point-of-sale rebates to commercial plans next year.

This time last year, Boudreaux stated that IngenioRx provides the insurer "significant opportunities" to grow its core operations and investment strategies in the Medicare space.

C-SUITE PERSPECTIVE: 

"Our first quarter 2019 results represent a strong start to the year. We reported significant growth in our risk-based membership and improved the penetration of our clinical and specialty services, demonstrating that our value proposition is resonating across our markets," Boudreaux said in a statement. "Looking ahead, the upcoming launch of IngenioRx is a key milestone in the realization of our vision and strategy. With IngenioRx, we finally have a strong integrated pharmacy and medical platform, one that is predicated on providing the lowest absolute cost of care, and we are well positioned for accelerated growth." 

In response to the positive metrics from Q1, Anthem is raising its financial guidance accordingly.

The insurer expects its year-end adjusted EPS to exceed $19.20, projects membership totalling between 40.9 million and 41.3 million members, and estimates operating revenues of $100 billion. 

Anthem also posted a benefit expense ratio of 84.4% in Q1, which is expected to rise to the range of 86.2% plus or minus 30 basis points by the end of 2019.

Jeff Becker, a senior analyst at Forrester, told HealthLeaders that the launch of IngenioRx should have a net positive impact on its benefit expense ratio once the transition is complete.

Related: Anthem, Cigna Await Delaware Court's Ruling

Healthcare stocks, especially the 'Big 5' insurers, have suffered mightily at the start of 2019, which Becker attributes to the growing legislative discussions and proposals surrounding 'Medicare for All.'

While Anthem's stock has been included in the overall industry decline, it reacted well to the company's Q1 earnings, trading up slightly during early morning trading.

ADDITIONAL ANTHEM Q1 EARNINGS REPORT HIGHLIGHTS:

  • In Q1, Anthem posted an operating cash flow of $1.6 billion, down from $2.2 billion this time last year but it's expected to top $5.2 billion by the end of 2019.
  • The insurer posted an operating gain of $1.9 billion, a 3.9% increase year-over-year.
  • Days in claims payable increased 2.3 days for Anthem, totalling 38.5 days as of March 31.

For complete financial information, review Anthem Inc.'s filing with the Securities and Exchange Commission.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: Photo credit: Murcia, Spain; Oct 23, 2018: Anthem logo in phone with earnings graphic on background. Anthem, Inc. is an American health insurance company - Image / Editorial credit: Pedro Martinez Valera / Shutterstock.com


KEY TAKEAWAYS

The company's operating EPS and adjusted EPS for Q1 were $5.91 and $6.03, respectively, which both topped estimates.

Most of the conversation on the company's quarterly earnings call centered around the launch of IngenioRx.

In response to the positive metrics from Q1, Anthem is raising its financial guidance accordingly.


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