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BETHESDA, Md. (Reuters)—Coventry Health Care Inc. reported a much better than expected quarterly profit on Tuesday, helped by improved performance in its Medicare and commercial businesses.
The sixth-largest U.S. health insurer by market value, Bethesda, Md.-based Coventry also forecast 2010 earnings generally in line with analyst targets.
Fourth-quarter net income rose to $109.1 million, or 74 cents per share, from $88.2 million, or 60 cents per share, a year earlier.
Analysts on average expected 56 cents per share, according to Thomson Reuters I/B/E/S.
Coventry's report closes the fourth-quarter reporting season for large U.S. health insurers, most of which posted earnings that were better than expected.
Revenue rose 15% to $3.43 billion. Analysts looked for $3.49 billion. Its total membership stood at 5.27 million at year end, up by about 640,000 from a year ago.
In its commercial plans serving employers, Coventry spent 82.9% of premiums on medical costs. That was less than 83.2% a year ago, and far below the 84.4% expected by analysts at Goldman Sachs. Wall Street watches the barometer closely for indicators of health insurers' profitability.
"As with others this quarter, Coventry's strong fourth-quarter results provide further evidence that industry price discipline has strengthened considerably with potential upside to sector commercial margins in 2010 (or limited downside, at least)," Goldman Sachs analyst Matthew Borsch said in a research note.
Coventry's Medicare Advantage plans for the elderly had 515,000 members at year end, an increase of 135,000 members from a year earlier. It spent 89.4% of premiums on medical costs, compared with 90.9% a year ago.
Coventry forecast 2010 profit of $2.10 to $2.25 per share. Analysts on average were looking for $2.23.
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