Tags: Coventry | manages | expenses | CVH

Coventry Manages Expenses, Expects Better Days

By    |   Monday, 27 February 2012 09:39 AM

Healthcare insurer Coventry Health Care (CVH) is seeing sales rise but profits fall as it pays down expenses, but better days may lie ahead as the overall health insurance sector improves.

In the fourth quarter of 2011, Coventry's revenue rose 3 percent on year to $3.13 billion. Net earnings fell 43 percent during the quarter to $85.7 million, mainly due to a 7 percent hike in operating expenses, which came in at $2.98 billion.

Membership declined in the company's commercial risk and Medicare Part D plans. Taxes rose on the company as well, although enrollment in Medicaid and other Medicare programs rose.

"As we wrap up 2011, we turn our focus toward 2012 with a forecast of double-digit revenue growth coupled with operating earnings and EPS growth. We are hard at work to deliver on 2012 commitments while laying the foundation to seize opportunities for the future," says company Chairman and CEO Allen F. Wise.

Wall Street banks have been skittish on Coventry, however. In September 2011, Wedbush downgraded the company to underperform from neutral. In August, Standpoint Research notched its recommendation down to hold from buy.

Greener pastures

Still, the overall U.S. health insurance sector appears to be headed toward greener pastures.

While the economy remains sluggish and new healthcare scrutiny creates uncertainty for the sector, insurance companies have done fairly well, Standard & Poor's analysts write.

"With healthcare reform promising major changes to the industry in just a couple of years, insurers are increasingly focused on assessing risks and opportunities while establishing capabilities to meet the challenge," says Standard & Poor's credit analyst Joseph Marinucci writes in a report on the sector.

Demand for services is picking up while access to capital has improved, as have retention rates, offsetting overall industry uncertainty as well as less demand from the public sector.

"We believe these factors will affect each company differently and will likely keep the number of rating actions moderate for 2012," Marinucci writes.

The company will release first quarter results on May 9.

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