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ANTM or CI: Comparing Their Operating Expenses in 2019

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Expense guidance

In its fourth-quarter earnings press release, Anthem (ANTM) guided for a 2019 benefit expense ratio in the range of 85.90%–86.50%, a YoY (year-over-year) rise of 170–230 basis points. According to the company’s fourth-quarter earnings conference call, its benefit expense ratio in 2019 isn’t comparable to its ratio in 2018 because of a one-year moratorium on the health insurer fee in 2019.

Excluding the impact of the health insurer fee, Anthem expects its benefit expense ratio to be flat on a YoY basis in 2019. According to its fourth-quarter earnings conference call, normalizing for the impact of its exit from certain markets in the individual marketplace business, Anthem’s benefit expense ratio is expected to be favorably affected by robust growth in its Medicare Advantage segment and improvement in its Medicaid segment.

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On its fourth-quarter earnings conference call, Cigna (CI) guided for a 2019 medical care ratio in the range of 80.5%–81.5% partly driven by projections of robust growth for its commercial and government-sponsored businesses, a one-year moratorium on the health insurer fee in 2019, and a change in its business mix following the completion of its acquisition of Express Scripts.

Wall Street’s projections

Wall Street analysts expect Anthem’s operating expenses to be $94.39 billion, $102.03 billion, and $113.53 billion, respectively, in 2019, 2020, and 2021, implying YoY rises of 9.41%, 8.09%, and 11.27%, respectively.

On the other hand, Wall Street analysts expect Cigna’s operating expenses to be $117.64 billion, $119.60 billion, and $116.51 billion, respectively, in 2019, 2020, and 2021, implying YoY changes of 164.43%, 1.66%, and -2.59%, respectively.

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