ANTHEM, INC.

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Anthem warns of elevated COVID costs in first quarter on Omicron surge

01/26/2022 | 11:48am EDT
FILE PHOTO: The office building of health insurer Anthem is seen in Newbury Park, California

(Reuters) -U.S. health insurer Anthem Inc on Wednesday issued a conservative annual profit forecast and warned that the highly contagious Omicron variant was likely to drive up treatment, vaccination and testing costs in the first quarter.

Since the start of the pandemic, profits of health insurers have come under pressure as huge costs related to direct COVID-19 treatment and tests cancel out any advantage gained from lower expenses due to delays in elective procedures.

"We anticipate another year in which the overall cost of care will track above normalized levels driven by COVID-related treatment, vaccination and testing costs," Chief Financial Officer John Gallina said.

Anthem shares fell about 1.3% in early morning trading after the insurer forecast 2022 adjusted profit of at least $28.25 per share, below market expectation of $28.65, according to Refinitiv data and in line with its preliminary guidance.

The company's comments on medical costs combined with a largely in-line fourth quarter are weighing on Anthem's stock, Credit Suisse analyst A.J. Rice said.

"I don't see anything that really changes our perspective on the stock. Anthem is one of the preferred names in managed care right now. This (stock move) will be short lived."

In contrast, rival UnitedHealth Group had last week predicted softer blow this year from the pandemic on expectation that added costs related to the Omicron surge would be offset by delays in non-urgent healthcare procedures.

Anthem said it expects annual benefit expense ratio - the percentage of premiums paid for medical services - to be between 87.5% and 88.5%. The midpoint is above analysts' estimate of 87.50%.

The lower the ratio, the better it is for a health insurer as it indicates a tight rein on costs. For Anthem, it was 87.5% in 2021, mainly due to rise in costs related to COVID-related care.

(Reporting by Manojna Maddipatla in Bengaluru; Editing by Arun Koyyur)

By Manojna Maddipatla


© Reuters 2022
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Financials (USD)
Sales 2022 153 B - -
Net income 2022 6 440 M - -
Net Debt 2022 15 879 M - -
P/E ratio 2022 19,7x
Yield 2022 0,95%
Capitalization 125 B 125 B -
EV / Sales 2022 0,92x
EV / Sales 2023 0,84x
Nbr of Employees 98 200
Free-Float 99,4%
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Mean consensus BUY
Number of Analysts 22
Last Close Price 520,55 $
Average target price 556,19 $
Spread / Average Target 6,85%
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Managers and Directors
Gail Koziara Boudreaux President, Chief Executive Officer & Director
John Edward Gallina Chief Financial Officer & Executive Vice President
Elizabeth E. Tallett Independent Chairman
Dustin Wilcox VP & Chief Information Security Officer
Gloria M. McCarthy Chief Administrative Officer & Executive VP
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