(Reuters) - Health insurer Anthem Inc , which plans to buy rival Cigna Corp for $54 billion, on Wednesday reported a better-than-expected quarterly profit as its Medicaid and Medicare businesses grew.
ANTHEM (ANTM.NY)aised its profit outlook for 2015 and expects health spending growth at the lower end of a range of 6.5 percent to 7.5 percent this year.
Anthem said last week its combination with Cigna would create the No. 1 U.S. health insurer with 53 million members.
The move is part of an industry shift to manage costs through growth, and negotiate better prices with providers. In early July, No. 3 insurer Aetna Inc
Anthem, which operates Blue Cross Blue Shield plans in more than a dozen states, said on Wednesday that spending on medical claims as a percentage of premiums fell to 82.1 percent from 82.7 percent a year ago. That is about 30 basis points better than Wall Street estimates, according to Leerink Partners analyst Ana Gupte.
Anthem shares were up 0.3 percent at $155.69. Anthem is the first insurer to report earnings since UnitedHealth Group Inc
REVENUES TOP EXPECTATIONS
Anthem's net income rose to $859.1 million, or $3.13 per share, for the second quarter, from $731.1 million, or $2.56 per share, a year earlier. Revenue increased 8.3 percent to $20.02 billion, topping analysts' expectations of $19.63 billion.
The company cited strong growth in its government Medicaid and Medicare businesses, where revenue rose 25.7 percent, helped by an 11 percent rise in Medicaid membership.
The expansion of Medicaid coverage for the poor under the national healthcare reform act began to boost membership in earnest starting in July of last year, Anthem Chief Financial Officer Wayne DeVeydt said during a conference call.
Anthem expects 2015 adjusted net income to be more than $10 per share, up from its previous forecast of more than $9.90. That reflects a slowdown in share buybacks related to the Cigna purchase.
Analysts expected full-year earnings of $10.11 per share, according to Thomson Reuters I/B/E/S.
Excluding items, Anthem earned $3.10 per share in the second quarter, well above the average analyst estimate of $2.77.
(Reporting by Caroline Humer in New York and Amrutha Penumudi in Bengaluru; Editing by Anil D'Silva and Jeffrey Benkoe)
