Health insurance giant Anthem, formerly known as WellPoint, closed its 2014 books with fourth-quarter earnings more than triple those in the same period the prior year.
Additionally, 2015 is expected to be a record-setting year for profitability as medical cost trends remain favorable and self-funded enrollments rise, the company indicated in financial results Wednesday morning.
Anthem's net income in the fourth quarter soared 242% to $506.7 million. That equaled $1.73 in adjusted earnings per share, 2 cents higher than what analysts predicted. Revenue in the quarter increased 6.4% to about $18.8 billion.
Part of the large jump in profits was due to charging higher premiums, which executives said was needed to "cover overall cost trends and new fees associated with healthcare reform" and low use of healthcare services from members.
Anthem's medical-loss ratio in the quarter was 84.5%, compared with 87.8% in the same three-month period from the prior year. The ratio describes what percentage of members' premiums goes to paying for medical services.
Anthem also benefited from the lack of a charge that affected its financials the prior year. In 2013, the insurer had to mark down a $160.7 million loss from the discontinued operations of 1-800 Contacts. Anthem sold 1-800 Contacts to a private-equity firm.
Adjusted earnings per share for 2014 reached $8.85, exactly what Anthem CEO Joseph Swedish predicted two weeks ago at the J.P. Morgan Healthcare Conference in San Francisco. Anthem's full-year net income rose 3.2% to almost $2.6 billion. Operating revenue was up 4%, exceeding $73 billion.
Anthem closed the year with 37.5 million members, also as expected. But Medicare Advantage continued to be Anthem's weak spot, as it lost 37,000 members on the year. Because of Medicare Advantage's rising nationwide enrollment and sizable profit margins, some analysts have speculated Anthem could try to grow that business through acquisitions this year. Anthem bought Simply Healthcare, an insurer with a Medicare Advantage presence in South Florida, at the end of 2014.
Looking ahead, Anthem said earnings per share in 2015 will be at least $9.30 as benefit costs stay low. Anthem expects to have 38.2 million members next year with most of the growth among the self-insured. Anthem, one of the most aggressive insurers on the exchanges established by the Patient Protection and Affordable Care Act, did not immediately comment on its exchange growth.
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