(Reuters) – Health insurer Anthem Inc reported a better-than-expected quarterly profit, driven by strong enrollments in its government business, particularly Medicaid.
Managed care companies that sell government-sponsored plans for the under-insured or uninsured have benefited from the expansion of Medicaid under Obamacare, boosting revenue in that business.
Revenue from the government business rose 25.7 percent during the second quarter ended June 30, helped by an 11 percent rise in Medicaid membership.
The health insurance industry, which has seen two big-ticket acquisitions this month, is rapidly consolidating as insurers seek to cut costs and negotiate with doctors and hospitals over pricing.
Anthem agreed to buy smaller rival Cigna Corp last week in a deal valued at $54.2 billion to become the largest U.S. health insurer. Rival Aetna Inc offered to buy Humana Inc for $37 billion.
Anthem said it expects 2015 adjusted net income to be more than $10 per share, up from its previous estimate of more than $9.90 per share.
Analysts were expecting full-year earnings of $10.11 per share, according to Thomson Reuters I/B/E/S.
Anthem’s consolidated benefit ratio, a measure comparing how much it spends on medical claims with the premiums it brings in, improved to 82.1 percent in the quarter from 82.7 percent a year ago.
The metric is keenly watched by investors, who are keeping a close eye on insurers and hospitals for signs of a rise in medical use and costs.
Net income rose to $859.1 million, or $3.13 per share, for the second quarter ended June 30, from $731.1 million, or $2.56 per share, a year earlier.
Excluding items, Anthem earned $3.10 per share, well above the average analyst estimate of $2.77.
Revenue rose 8.3 percent to $20.02 billion, topping analysts’ expectations of $19.63 billion.
(Reporting by Amrutha Penumudi in Bengaluru; Editing by Anil D’Silva)