By Jane Anderson

Anthem, Inc. continued to struggle with a higher-than-anticipated medical loss ratio (MLR) during the last quarter of 2019, and its earnings per share (EPS) guidance for 2020 fell short of what equities analysts were anticipating as the insurer reported fourth quarter and full-year 2019 results.

“Overall, the fourth quarter medical loss ratio was 89%, representing an increase of 220 basis points over the prior year, which, as expected was primarily driven by the one-year waiver of the health insurer fee,” Anthem Chief Financial Officer John Gallina said Jan. 29 during the company’s earnings conference call.

Gallina also blamed a technical risk adjustment in the individual market, plus a flu season that started earlier than normal, “resulting in more flu costs than expected in the fourth quarter.” And finally, he said that Anthem’s growing government book of business — which tends to come with a higher MLR — is pushing the firm’s overall MLR higher.

Anthem finished 2019 with a full-year MLR of 86.8%, at the top end of its 86.5% to 86.8% outlook.
Evercore ISI analyst Michael Newshel pointed out in an investor note that other health care firms — specifically, UnitedHealth Group and HCA Healthcare — had reported a muted flu impact. Newshel said that Anthem is underperforming on MLR compared to its peers.

Anthem’s MLR missed expectations for the fourth quarter in a row, Newshel wrote, and 2020 MLR guidance also is above expectations.

Anthem’s EPS outlook for 2020, which it said was “greater than $22.30,” came in lower than what analysts including Barclays’ Steve Valiquette had been anticipating after the insurer’s third-quarter earnings call, Valiquette advised investors in a Jan. 29 note. But he pointed out that the 2020 return of the HIF, which will be repealed effective 2021, “completely explains the delta for 2020 EPS expectations, in our view, and leads to a higher 2020 MLR.” Anthem’s fourth-quarter adjusted EPS was $3.88, and its full-year adjusted EPS was $19.44.