EARNINGS PREVIEW: Health Insurers Look for Stability in 2nd Quarter
07/16/2012| 11:08am US/Eastern
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By Jon Kamp
TAKING THE PULSE: U.S. health insurers could show some stability in second-quarter earnings reports following a rocky first quarter that was beset by a host of issues and was followed by more turmoil surrounding the Supreme Court's ruling on the health-care law. How much Americans are using health services after a long slowdown--which provided a big earnings boost last year--will remain a big question following mixed signals early this year. "Anecdotal evidence continues to suggest a benign utilization environment, which we expect should lead to in-line to slightly better than expected results among the large-cap diversified" insurers, Susquehanna analyst Chris Rigg said. He expects industry results will be "respectable across the board."
COMPANIES TO WATCH:
UnitedHealth Group Inc. (>> UnitedHealth Group Inc.) -- reports July 19
Wall Street Expectations: Analysts expect the biggest managed-care firm by sales and members to report earnings of $1.19 per share on revenue of $27.34 billion. A year earlier, UnitedHealth earned $1.16 a share on revenue of $25.23 billion.
Key Issues: The industry bellwether will hold the first earnings call following the Supreme Court's decision to largely uphold the health-care law. The ruling pressured big insurers' shares because investors were hopeful at least some of the law would get tossed, taking away measures expected to weigh on earnings. UnitedHealth may also get some questions about its Medicaid strategy on the heels of WellPoint Inc.'s (>> WellPoint, Inc.) announced $4.46 billion deal to buy Medicaid insurer Amerigroup Corp. (>> AMERIGROUP Corporation).
WellPoint Inc. (>> WellPoint, Inc.) -- reports July 25
Wall Street Expectations: Analysts anticipate WellPoint will to post earnings of $2.08 a share on revenue of $15.27 billion. In the year-earlier period, the company earned $1.89 a share on revenue of $14.88 billion.
Key Issues: WellPoint's Amerigroup deal will make it the biggest player in the market for Medicaid plans, which cover people on the government health program for the poor. WellPoint's deal also represents a big bet on an emerging market for covering "dual-eligible" people who qualify for both Medicaid and Medicare, the program for the elderly. WellPoint's second quarter last year took a hit from an unexpected problem with high-cost seniors, which the company has since said is fixed.
Aetna Inc. (>> Aetna Inc.) -- reports July 31
Wall Street Expectations: Aetna is expected to report earnings of $1.26 a share on revenue of $8.8 billion. A year ago, the company earned $1.39 on revenue of $8.32 billion.
Key Issues: Aetna is coming off a complex first-quarter that disappointed investors when there wasn't an earnings-boosting surplus of money previously set aside to cover patient claims. Management has assured that Aetna's rates and reserves are set properly for expected health-care trends, but this issue will likely get some attention after the tumult three months earlier. Meantime, Aetna is engaged in a court battle to win back a Medicaid contract in Ohio. Jefferies analyst David Windley expects Aetna to rebound from recent weakness.
Humana Inc. (>> Humana Inc.) -- reports Aug. 6
Wall Street Expectations: Analysts expect Humana to report earnings of $2.28 per share on revenue of $9.8 billion. A year ago, the insurer earned $2.71 a share on sales of $9.28 billion.
Key Issues: Humana in May lowered its second-quarter, per-share earnings guidance by 17 cents to account a $45 million settlement. Meantime, the company may get some questions, in the wake of WellPoint's Amerigroup deal, on its strategy for winning dual-eligible patients. Humana has previously talked down the idea of acquisitions in favor of partnerships with Medicaid firms. The company, which is heavily focused on Medicare plans, remains interested in deals to bulk up in that market, however.
Cigna Corp. (>> CIGNA Corporation) -- reports Aug. 2
Wall Street Expectations: Analysts expect earnings of $1.42 a share on revenue of $7.24 billion. The company a year earlier earned $1.50 a share on revenue of $5.51 billion.
Key Issues: Cigna continues to digest its recent $3.8 billion acquisition of Medicare-focused insurer HealthSpring, and the second quarter will be the first to entirely include the new business. Cigna last week announced plans to buy a 51% stake in Finans Emeklilik, a life and pension provider in Turkey.
(The Thomson Reuters estimate and year-earlier earnings may not be comparable due to one-time items and other adjustments.)
Write to Jon Kamp at jon.kamp@dowjones.com
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