Anthem inks deal to acquire Medicare Advantage insurer, reports strong Q3 results

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Anthem's third-quarter adjusted earnings per share of $2.65 beat analysts’ consensus estimate by 10%. (Getty/BeeBright)

Right on the heels of announcing that it plans to buy a Medicare Advantage organization, Anthem reported strong third-quarter financial results and raised its full-year earnings outlook.

The MA organization in question is America’s 1st Choice, which serves 130,000 members in 25 Florida counties and three South Carolina counties. The privately held, for-profit company sells HMO products such as chronic special needs plans and dual-eligible special needs plans, and its health plans received four- and five-star ratings in 2018.

As we look ahead, we will continue to maintain a diligent focus on innovating our Medicare Advantage product portfolio,” CEO Joseph Swedish said in a release. “The acquisition of America’s 1st Choice, which has strong technology tools and expertise designing and implementing engagement programs, fits well with our growth objective and will also enhance our ability to deliver a broad variety of cost-effective high-quality plans to meet the diverse needs of the Medicare population.”

Financial terms of the deal were not disclosed, but Anthem did say that the acquisition is likely to close in the first quarter of next year, pending regulatory approval. The transaction is expected to be slightly accretive to earnings in 2018.

This is the second Medicare Advantage acquisition that Anthem has made recently in the Sunshine State, as the company announced in September that it had made a deal to acquire HealthSun.

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As for Anthem’s earnings in the third quarter, the company reported net income of $746.9 million, or $2.80 per share. Its adjusted earnings per share of $2.65 beat analysts’ consensus estimate by 10%.

Its full-year adjusted net income is now expected to be in the range of $11.90 to $12 per share, beating the consensus of $11.84 and representing an increase from its previous guidance.

Anthem’s operating revenue was $22.1 billion for the quarter, a 4.6% year-over-year increase that it said was driven by premium rate increases as well as higher enrollment in its Medicare, Medicaid, local group insured and self-funded businesses.

Anthem’s individual market business also performed slightly better than expected in the quarter, Swedish noted during an earnings call Wednesday. The company now expects that its individual business will be “relatively break even” in 2017, Swedish said, but cautioned that the company needs additional regulatory clarity to fully understand the impact of the Trump administration ending cost-sharing reduction payments.

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As for 2018, Swedish said that Anthem will be exiting a little more than half of the rating areas where it currently participates, ultimately cutting its ACA-compliant membership by about 70%.

That said, he expressed confidence that those exits would put Anthem in a better position amid continuing individual market turmoil. Overall, the company expects its ACA-compliant business to be slightly profitable next year.

“If uncertainty in marketplace is reduced, we would have increased confidence to re-enter certain rating regions in 2019,” Swedish added.