UPDATE 1-Coventry profit just misses analysts’ target
* Q1 EPS 62 cents vs 63-cent Street view
* Medicaid costs weigh
* Follows Aetna’s Q1 miss on Thursday
April 27 (Reuters) – Insurer Coventry Health Care Inc reported quarterly profit that was slightly lower than expected on Friday, hurt by high costs in its Medicaid plans for low-income Americans.
While overall enrollment in Coventry’s Medicaid plans nearly doubled, costs for a plan in the state of Kentucky were well above premiums.
“Unfortunately, concern over the higher costs in Kentucky will overshadow the otherwise solid results this quarter,” Goldman Sachs analyst Matthew Borsch said in a research note.
Shares of Coventry, a mid-sized health insurer, rose 2 cents to $32.70 in light pre-market trading.
Coventry’s report comes a day after larger rival Aetna Inc’s profit missed Wall Street’s target and said healthcare-claim costs may be about to rise, sending its shares tumbling.
The quarterly earnings of UnitedHealth Group Inc and WellPoint Inc, the two biggest health insurers, exceeded expectations, and both raised their outlooks for the year.
Coventry’s first-quarter net income rose to $170.7 million, or $1.20 per share, from $110.2 million, or 73 cents per share, a year earlier.
Results in the quarter got a big boost from a release of reserves related to its Medicare plans for seniors. Excluding the reserve release, earnings of 62 cents per share were a penny shy of the average estimate of analysts, according to Thomson Reuters I/B/E/S.
Revenue grew 21 percent to $3.69 billion, about $200 million ahead of estimates. Its membership jumped about 16 percent to 5.26 million, as Medicaid enrollment nearly doubled to 924,000.
Coventry saw greater-than-expected medical claims expenses in Kentucky for its Medicaid plan, which became effective late last year. The Kentucky contract represents about 5 percent of company revenue, according to Goldman’s Borsch.
The company backed its 2012 earnings forecast of a range of $3.10 to $3.30 per share. Analysts have been looking for $3.26.
Through Thursday, Coventry shares had risen more than 7 percent this year, less than the 12-percent climb for the Morgan Stanley Healthcare Payor index of health insurers.