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Insurer Anthem underwhelms Wall Street with 2020 forecast

January 29, 2020 GMT
FILE - In this May 14, 2019, file photo signage on the outside of the corporate headquarters building of health insurance company Anthem is shown in Indianapolis. Anthem started the new year by forecasting earnings that could miss expectations even after the health insurer books gains from a new business. The Blue Cross-Blue Shield insurer expects earnings adjusted for one-time items to exceed $22.30 per share in 2020. (AP Photo/Michael Conroy, File)
FILE - In this May 14, 2019, file photo signage on the outside of the corporate headquarters building of health insurance company Anthem is shown in Indianapolis. Anthem started the new year by forecasting earnings that could miss expectations even after the health insurer books gains from a new business. The Blue Cross-Blue Shield insurer expects earnings adjusted for one-time items to exceed $22.30 per share in 2020. (AP Photo/Michael Conroy, File)

Anthem is starting the new year by forecasting earnings that could miss expectations even after the health insurer books gains from a new business.

The Blue Cross-Blue Shield insurer also reported on Wednesday earnings from the final quarter of 2019 that missed forecasts, and its stock dropped in midday trading.

Anthem predicted that earnings adjusted for one-time items will be greater than $22.30 per share in 2020. That includes income from IngenioRx, a pharmacy benefits management business it launched ahead of schedule last year.

Analysts on Wall Street expect earnings of $22.72 per share, according to FactSet.

Anthem CEO Gail Boudreaux had said last fall that the company expected core, adjusted earnings to grow near the low end of a goal of 12% to 15%.

Jefferies analyst David Windley called the forecast issued Wednesday disappointing. Windley said in a research note that he thought that Boudreaux’s prediction implied a 2020 forecast of around $22.70 per share, counting any gains from IngenioRx.

Indianapolis-based Anthem Inc. runs insurance plans in several states, including big markets like California, New York and Ohio. It covers 41 million people as the nation’s second-largest insurer.

Enrollment grew nearly 3% in the final quarter of 2019, helped by gains from the company’s Medicare and Medicaid businesses.

Medicare is the federal government’s coverage program mainly for people age 65 and over, while Medicaid is a state-and-federally funded program that focuses on the poor. Anthem, like other insurers, is counting more on these programs for growth as the market for commercial coverage matures.

Anthem said it also was helped in the quarter by the launch of IngenioRx, which contributed to a $535 million operating gain from the insurer’s commercial and specialty business. That total jumped nearly 70% jump compared to the final quarter of 2018.

Boudreaux told analysts Wednesday morning that the company expects to grow its new business, especially among its health insurance customers who went elsewhere for pharmacy benefits because they didn’t have a competitive option through Anthem.

“We’re seeing real big opportunities for us both in 2020 as well as in 2021,” she said.

While Anthem booked IngenioRx gains, it also saw its largest expense, the cost of benefits, jump 13% to $21.38 billion in the fourth quarter.

Overall, Anthem’s quarterly net income more than doubled to $934 million. Adjusted results came to $3.88 per share while operating revenue climbed 16% to $27.13 billion.

Analysts expected earnings of $3.90 per share on $26.85 billion in revenue, according to Zacks Investment Research.

For the year, the company reported a profit of $4.81 billion, on $103.14 billion in revenue.

Company shares tumbled more than 4%, or $13.15, to $277.17 in midday trading Wednesday. Meanwhile, broader indexes rose less than 1%.

Anthem shares had climbed more than 15% last year, with the price topping $300 to reach a new all-time high. That’s nearly half the gain of the roughly 29% advance from the broader S&P 500 index.

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Follow Tom Murphy on Twitter: @thpmurphy

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on ANTM at https://www.zacks.com/ap/ANTM