A.M. Best Special Report: Publicly Traded Health Insurers Increase Revenues, Operating Earnings in 2015

Managed Care Weekly Digest

By a News Reporter-Staff News Editor at Managed Care Weekly Digest -- The stock price performance of publicly traded U.S. health insurance companies covered in a new A.M. Best special report increased 11.3% in 2015 year-over-year, besting the broader market's -0.7% decline (see also A.M. Best).

The Best Special Report, titled, "Publicly Traded Health Insurers Increase Revenues, Operating Earnings in 2015," states that stock price performance of the 12 companies followed rose 2.5% in fourth-quarter 2015 after a pullback of 12.2% in the previous quarter. Five companies reported a decline in stock price performance for the fourth quarter, while conversely, four companies posted double-digit increases for the quarter. The report also notes that the full-year increase would have been higher if not for Centene Corporation's (CNC) two-for-one stock split via a stock dividend in February 2015. The stock split ultimately led to a decline of 36.6% for the full year at CNC.

The U.S. health industry reported strong year-over-year revenue growth of 14.3% through year-end 2015. More than 40% of the population's revenue growth was reported by UnitedHealth Group Incorporated (UnitedHealth), which saw revenues increase by $26.6 billion. Overall operating margins for the U.S. health industry have been impacted by a slight uptick in medical trends, an increase in generic prescription drug costs and new expensive specialty pharmaceutical medicines. Despite that, the overall revenue increases led to a year-over-year growth in operating earnings of 9.6% for this population.

A.M. Best's outlook for the U.S. health insurance industry was recently revised to negative from stable, largely related to earnings and capitalization pressure as a result of the Patient Protection and Affordable Care Act (ACA). Growing market concern of compressed margins is further signaled by UnitedHealth, which warned in late 2015 that it may stop offering insurance plans to individuals through the public exchanges established by the ACA.

A.M. Best views favorably the emphasis on diversification, implementation of technology and expense-reduction initiatives that have more recently been embraced by the large publicly traded companies, and these strategies should continue to facilitate revenue and earnings growth. However, it will be interesting to see if there is a domino effect related to UnitedHealth's decision to possibly exit the health insurance exchanges and how that could affect the rest of the industry.

To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=248015. A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED. View source version on businesswire.com: http://www.businesswire.com/news/home/20160411005732/en/