INDIANAPOLIS (AP) — Anthem delivered a better-than-expected third quarter even though a jump in benefit expenses and other costs contributed to an 81% drop in the health insurer’s net income.
The Blue Cross-Blue Shield coverage provider also said Wednesday that it was leaving its 2020 earnings forecast unchanged, as insurers continue to deal with uncertainty caused by the COVID-19 pandemic.
Anthem saw its profit double earlier during the second quarter, as the pandemic forced patients to stay home and away from doctor’s offices and surgery centers. But Anthem and its competitors say health care use is starting to rebound, and now it includes the cost of caring for COVID-19 patients.
Health care use not related to COVID-19 largely returned to normal levels in the third quarter, company leaders told analysts Wednesday morning. They expect more costly procedures like joint replacement surgeries to come back faster.
Anthem covers more than 42 million people in several states, including big markets like New York and California. It also runs a pharmacy benefits management business called IngenioRx.
The insurer booked adjusted earnings of $4.20 per share in the quarter that ended Sept. 30. Operating revenue, which excludes investment gains or losses, climbed 16% to $30.65 billion.
Analysts expected, on average, earnings of $4.04 per share on $29.81 billion in revenue, according to Zacks Investment Research.
Higher investment income largely drove the better-than-expected performance, Jefferies analyst David Windley said in a research note.
Anthem’s net income fell to $222 million from $1.18 billion in last year’s quarter. The company’s benefit expense climbed 10%, and selling, general and administrative costs soared 55% partially due to a litigation settlement and the return of a health insurance tax this year.
The insurer also booked $607 million in “business optimization” charges. Spokeswoman Jill Becher said that money went toward modernizing the company’s operations. Anthem added digital technology and artificial intelligence and consolidated system platforms, among other things.
Indianapolis-based Anthem Inc. said it still expects adjusted earnings for 2020 to surpass $22.30 per share.
Analysts forecast, on average, adjusted earnings of $22.46 per share, according to FactSet.
For next year, Anthem still expects adjusted earnings per share to meet its long-term growth goal of 12% to 15%. But Chief Financial Officer John Gallina said results would be skewed toward the lower end of that range due to risks and challenges presented by the pandemic.
Company shares fell nearly 3% to $290.50 late Wednesday morning on another down day for the broader market.
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
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