Anthem (ELV -0.73%) claims a dubious distinction in 2020. It's the worst-performing stock among the big health insurers (excluding CVS Health, which owns Aetna but generates more of its revenue from its pharmacy-related businesses).

But Anthem could be on the path to moving up in the ranks. The big health insurer announced its first-quarter results before the market opened on Wednesday. And its numbers looked pretty good. Here are the highlights from Anthem's Q1 update.


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By the numbers

Anthem generated first-quarter revenue of $29.4 billion, a strong 21% year-over-year jump. This result also easily topped analysts' average revenue estimate of $28.6 billion.

The company announced Q1 net income of $1.52 million, or $5.94 per share, based on generally accepted accounting principles (GAAP). In the same quarter of 2019, Anthem record GAAP earnings of $1.55 million, or $5.91 per share. 

Anthem reported Q1 adjusted earnings of $6.48 per share, up nearly 8% year over year. It also met the consensus Wall Street adjusted earnings estimate for the first quarter.

Behind the numbers

One of the biggest keys to success for a health insurance company is to gain more members. Anthem checked off this box in the first quarter. The company reported that its medical enrollment grew 3.2% year over year and 2.8% quarter over quarter to 42.1 million members. 

Acquisitions played an important role in this growth. Anthem acquired Medicaid members in Missouri and Nebraska, helping to boost its government business enrollment by 849,000 lives compared to the prior-year period. It also acqquired third-party administrator AmeriBen, a move that helped increase commercial and specialty business enrollment by 452,000 lives.

Anthem's Q1 revenue growth was fueled in part by the launch of its IngenioRx pharmacy benefits management (PBM) business as well. In addition, the company increased premium rates in the first quarter to cover cost trends and the reinstated health insurance tax.

Another key to success for health insurers is to control medical costs in relation to premiums charged. Anthem checked off this box in the first quarter, too. The company's benefit expense ratio, which measures the cost of providing insurance to the premium revenues received, declined to 84.2% from 84.4% even with an extra calendar day in the first quarter of 2020.

Looking ahead

The COVID-19 pandemic is impacting most companies in the healthcare sector. Anthem isn't an exception. The company temporarily suspended its share buybacks to boost its liquidity and financial flexibility during the coronavirus crisis. It also withdrew some of its previous guidance for 2020 until there are fewer uncertainties related to the COVID-19 outbreak.

Anthem did, however, project that its GAAP earnings per share will be more than $21 for full-year 2020. It also expects adjusted earnings per share will top $22.30, which is higher than the average analysts' estimate.