Coventry 2Q profit rises, helped by settlement(2)
Health insurer Coventry Health Care Inc.'s second-quarter profit jumped compared with a year earlier, thanks in part to a settlement agreement for class-action litigation in Louisiana, but its new 2011 earnings forecast fell below Wall Street expectations.
The Bethesda, Md., company earned $224.5 million, or $1.51 per share, in the three months that ended June 30. That includes an adjustment of 68 cents per share tied to the settlement, which was approved by a court during the quarter. Excluding that settlement, it earned 83 cents per share.
Analysts surveyed by FactSet on average expected adjusted earnings of 76 cents per share on $3.01 billion in revenue.
In the same quarter last year, Coventry earned $1 million, or a penny per share, after it set aside $278 million to cover Louisiana legal costs. The lawsuit accused the insurer's First Health Group unit of violating notice provisions of Louisiana's Any Willing Provider Act related to the treatment of injured workers with worker's compensation claims.
The company recorded the gain in this year's second quarter because it set aside more money than it needed.
Coventry's second-quarter revenue rose 6 percent to $3.03 billion in this year's second quarter.
Coventry shares sank $1.71, almost 5 percent, to $32.96 Friday morning as the company's improved outlook remained short of analyst expectations.
Coventry now expects 2011 adjusted earnings of between $2.80 and $2.95 per share, up from its April forecast for $2.62 to $2.85 per share. Analysts expect earnings of $2.99 per share.
Total premiums collected climbed nearly 7 percent to $2.74 billion in the second quarter, but the insurer said several expenses rose too. Medical costs climbed 11 percent to $2.25 billion. Selling, general and administrative expenses were up 7 percent to $484.9 million.
Total medical membership was 3.4 million, a slight gain compared to this year's first quarter and a 5-percent increase compared to last year's second quarter.