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Analysis

Anthem Expects Year-End Earnings to Grow on Strength of IngenioRx

By Jack O'Brien  
   July 24, 2019

The insurer's membership grew by 1.3 million while operating revenues rose by almost 11%.

Anthem Inc. expects its year-end net income per share to exceed previous expectations thanks to the introduction of the insurer's pharmacy benefit manager (PBM) IngenioRx, according to the company's earnings report released Wednesday morning.

The Indianapolis-based insurer reported a net income of $4.36 per share for Q2, with an adjusted net income of $4.64 per share. Looking ahead, Anthem projects its year-end net income to be greater than $18.34 per share while its adjusted net income will exceed $19.30 per share.  

During Q2, Anthem saw its medical enrollment reach 40.9 million members, up 1.3 million compared Q2 2018, while operating revenues rose by almost 11% to $25.2 billion.

Anthem attributed the strong revenue metrics to business-wide membership growth and premium increases, though it noted the results were partially offset by the one year waiver of the health insurance tax.

C-SUITE PERSPECTIVE: 

"Our second quarter results reflect solid top line growth across our businesses and reinforce our commitment to innovation and performance execution," Gail Boudreaux, CEO of Anthem said in a statement. "We began successfully migrating members to IngenioRx on May 1 and have received transition approvals from all of our 14 Blue states and the majority of our Medicaid states. We are tracking ahead of expectations, and as a result, we now expect IngenioRx to achieve the upper end of our $0.70 - $0.90 guidance." 

Boudreaux added that IngenioRx secured its first external pharmacy contract with Blue Cross of Idaho, which will begin in 2020.

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

Breaking down Anthem's membership growth, its government segment grew by 1 million members courtesy of Medicare and Medicaid, while the commercial and specialty segment increased by 290,000 members.

Once again, the insurer posted a total operating gain, however its $1.4 billion gain marked an 8% decline year-over-year.

Related: Earnings Solid for Health Insurers in Q1 Due to Membership Growth

Beyond the debut of IngenioRx, Anthem's most significant business move was the announcement in early June that it planned to purchase Beacon Health Options, a Boston-based behavioral health organization.

Related: Anthem Expands Behavioral Health Options With Beacon Purchase

Despite Anthem's decent Q2 earnings report, the company's stock fell by nearly 7% during early morning trading.

Jeff Becker, a senior analyst at Forrester, told HealthLeaders that Anthem's "aggressive shift" to value-based care (VBC) contracting is already ahead of pace while the company had improved its digital member engagement strategy.

During Anthem's earnings call, they reported 59% of medical spend fell under its VBC agreements, according to Becker, and is in line with its goal of achieving 75% by the end of 2020. He added that Anthem has tied 36% of its VBC contracts to downside-risk shared savings programs. 

ADDITIONAL ANTHEM Q2 EARNINGS REPORT HIGHLIGHTS:

  • In Q2, Anthem posted an operating cash flow of $1.4 billion, an increase of nearly $900 million year-over-year.
  • On Tuesday, the company distributed its Q2 dividend totaling $206 million.
  • Anthem repurchased 1.7 million shares in Q2 for $458 million.

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

Editor's note: This story has been updated to include commentary from Jeff Becker of Forrester.

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

Photo credit: 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

Anthem saw its medical enrollment reach 40.9 million members, thanks to growth among its government and commercial segments.

IngenioRx secured its first external pharmacy contract with Blue Cross of Idaho, which will begin in 2020.

CEO Gail Boudreaux remarked that the insurer is "tracking ahead of expectations."


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