Diversified managed healthcare company Coventry Health Care Inc. (CVH) posted a decline in third-quarter profit, as it recorded a $26.7 million charge related to its First Health Services Corp. divestiture. Further, the company lifted its earnings forecast for the full year.
The Bethesda, Maryland-based company's third-quarter net income was $70.6 million or $0.48 per share, compared to $85.5 million or $0.58 per share in the year-ago quarter.
Net income from continuing operations advanced to $100.4 million or $0.68 per share from $78.9 million or $0.53 per share in the same quarter of last year.
Excluding the impact of the First Health Services Corp. or FHSC divestiture in the third quarter, which resulted in a net charge of $26.7 million, or $0.18 per share, adjusted net earnings were $97.3 million or $0.66 per share.
On average, 18 analysts polled by Thomson Reuters expected the company to post earnings of $0.54 per share. Analysts' estimates typically exclude special items.
The company noted that the adjusted earnings of $0.66 per share include earnings from continuing operations of $0.68 per share and a loss of $0.02 per share from FHSC operations during the quarter.
Quarterly operating revenues totaled $3.44 billion, an increase from the previous year's operating revenue of $2.93 billion. Fourteen Wall Street analysts had a consensus revenue estimate of $3.47 billion for the quarter.
Allen Wise, chairman and chief executive officer of Coventry, said, "I continue to be pleased with the Company's financial and operational results for 2009 including today's increase to full year EPS guidance. In the face of a challenging environment, we feel confident that focusing on our seven core businesses and driving a low cost structure will best position Coventry for the future."
Managed care premiums increased to $3.15 billion from $2.63 billion in the prior-year quarter, while revenues from management services totaled $290.9 million, down from $298.4 million in the comparable quarter of the previous year.
The company noted that the operating earnings, as a percentage of total revenues, dropped to 4.4% from $5.3% a year earlier, as the company recorded total operating expenses of $3.29 billion, up from $2.77 billion incurred in the same quarter of last year. Medical costs, a major operating expense, grew to $2.66 billion from $2.20 billion last year.
For the quarter, Coventry Health reported continued growth in Medicare products, with Medicare Coordinated Care Product or CCP membership growth of 38% from last year. Commercial premium yields rose to $304.13 per member per month in the quarter, up 6.1% from the year-ago quarter.
Medicare Advantage membership increased to 521 thousand as of September 30, 2009, an increase of 141 thousand members year-to-date. Meanwhile, Medicare Advantage CCP membership grew to 185 thousand, up by 48 thousand members year-to-date.
As of September 30, 2009, Medicare Part D membership was 1.63 million, an increase of 81 thousand members from the prior quarter and 705 thousand members year-to-date. The Medicare Part D MLR was 79.4% in the quarter and 91.9% year-to-date, and 91.9% year-to-date, compared to the third quarter 2008 year-to-date MLR of 91.5%.
For the nine-month period, the company reported net income of $133.2 million or $0.90 per share, compared to $293.7 million or $1.94 per share in the prior-year period.
Year-to-date, income from continuing operations decreased to $133.2 million or $1.40 per share from $280.7 million or $1.86 per share in the comparable period of the previous year.
Total operating revenues for the nine months ended September 30, 2009 were $10.5 billion, up from $8.76 billion reported in the year-earlier period.
Looking ahead, the company now expects its fiscal 2009 adjusted earnings of $2.01 - $2.03 per share, an increase of $0.12 per share from the midpoint of the prior range of $1.85 -$1.95 per share. The revised outlook excludes the impact of the FHSC divestiture.
On a GAAP basis, full-year earnings are currently projected in the range of $1.45 - $1.47 per share, compared to the prior forecast range of $1.25 - $1.40 per share, including non-cash charge of $0.56 per share related to the FHSC divestiture.
Among Coventry Health's rivals, Aetna Inc. (AET) reported third-quarter net income of $326.2 million or $0.73 per share, up from $277.3 million or $0.58 per share in the previous year, aided primarily by improved valuations in its investment portfolio. Quarterly revenue, excluding net realized capital gains, totaled $8.70 billion, an increase of 9%, compared to $7.98 billion in the prior-year quarter. For fiscal 2009, the company currently projects operating earnings to be $2.75 per share, compared to the previously communicated outlook range of $2.75 - $2.90 per share.
Another peer, UnitedHealth Group, Inc. (UNH) posted higher profit for the third quarter that totaled $1.04 billion or $0.89 per share, compared to $920 million or $0.75 per share in the prior-year quarter, driven by strong overall third quarter performance in services businesses and effective cost controls. Total revenues grew 8% to $21.7 billion from $20.16 billion in the previous year. For fiscal 2009, the company continues to expect earnings of about $3.15 per share and cash flows from operations of about $5 billion.
Yet another competitor, WellPoint Inc. (WLP) reported a decline in third-quarter profit, totaling $730.2 million or $1.53 per share, compared to $820.7 million or $1.60 per share a year ago, as medical enrollment continues to decreased, hurt by recession and rise in unemployment. Total revenues advanced 3.1% to $15.4 billion from $14.9 billion in the previous year.
Coventry Health shares, which have been trading between $7.97 and $24.84 in the past 52 weeks, closed Thursday's trading session at $20.91.
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