by Jane Anderson
Anthem, Inc., and Cigna Corp. both reported slightly
better-than-expected medical loss ratios (MLRs) as part of their first-quarter
2020 earnings, in part due to delays in elective procedures resulting from the
COVID-19 pandemic. Both insurers also reaffirmed their overall
earnings-per-share (EPS) guidance for 2020.
But the insurers warned that MLRs may tick up later this year.
In addition, they predicted that the impact of COVID-19 may lead to significant
shifts in enrollment, as workers who are laid off shift to Medicaid or to the
Affordable Care Act exchanges.
Anthem posted a first-quarter MLR of 84.2%, slightly better than
the consensus estimate of 84.3%, "likely aided to a limited degree by
COVID-19 toward the latter part of the quarter," Citi analyst Ralph
Giacobbe pointed out in an investor note.
Anthem's second-quarter MLR "should be historically
low" due to delayed procedures, but that will be offset by a rebound in
volumes, buyback suspension and low net interest/investment income during the
second half of the year, Jefferies equities analyst David Windley wrote in an
investor note.
Anthem management indicated that 40% to 50% of disenrolled
commercial lives will move to Medicaid, while 30% will move into individual
health insurance, Windley wrote. "However, this creates an unfavorable
mix," with lower per-member per-month payments, especially in Medicaid,
and a move to lower-margin products, he noted.
Meanwhile, Cigna reported an MLR of 78.3%, compared with
analysts' consensus estimate of 79.3%, Giacobbe pointed out in an investor
note. Cigna is maintaining its 2020 guidance for EPS and revenue, while
dropping its outlooks for MLR and other specific financial metrics.
"The impact of COVID-19 is still developing," Cigna
President and CEO David Cordani said April 30. "We clearly see headwinds
driven by the recession that it's causing, including, for example,
disenrollment within our commercial customers, both in our integrated medical
business [and] our health service business, as well as some pressure in our
group disability business."
However, Cigna expects "the strength of our first quarter
to drive us to another strong year for revenue, earnings and free cash
flow," he added.
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