瑞信美股医疗保健行业管理式医疗下半年预期合理2018年Q2总结201881527页

DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.15August2018Americas/UnitedStatesEquityResearchManagedC[e-mail]@[e-mail],[e-mail]eforSecondHalfFollowingSolidQuarter;2Q18Recap■AllMCOsinOurCoveragePostedQ2EPSAheadofExpectations.TheMCOsinourcoveragebeatconsensusbyroughly7%,andreportedEPSgrowthof19.1%Y/Y,onaverage.Someofthereportsrequiredmoreexplainingthanwe’veseeninrecentperiods.ForUNH,forinstance,highexpectationsheadingintoQ2andsomemovingpartsinthequarter(MLR/PYD)promptedsomeprofittaking.CNCresultsbeatestsbutwerehelpedbyapublicexchangeriskadjustmentaccrual.ANTM’s2QresultswereaheadonasolidMLRbeatandwererelativelycleaninourview.However,confusionoverDCPsandtheexpectedpick-upin2HMLRcausedsomeinitialweakness.HUMreportedastrongbeatandraisequarterbutitscommentthat2019pre-taxMAmarginswouldbebelowitsLTtargetof4.5-5.0%washeavilydiscussedonitsQ2confcall.Finally,Cignamayhavehadthecleanest“beatandraise”2Q.Alongwiththe2Q18earningsrelease,theMCOs,whohaveofferedfullyear2018guidance,allchosetoraisetheiroutlooksatleastasmuchastheQ2outperformance.■Medicalcosttrendsremainedin-linetofavorable.In2Q18,commercialcosttrendsremainedin-linetofavorablerelativetoexpectationsforMCOs.CIlowereditscosttrendguidanceby50bps,reflectingstrengthacrosstheboardineachmajortrendcategory.ForcoveredMCOs,consolidatedMLRdecreased60bps,onavg.Y/Yto82.2%in2Q18primarilyduetoHIFre-initiation(versus2Q17)andfavorablemedicalcosts.■2H18Catalysts:Cigna/ESRXshareholdervoteforthependingdeal(August24th)isanear-termfocus.WithISSandGlassLewisrecommendationsfavoringthependingtransactionandtheactivistinvestorabandoningeffortstoblockCI-ESRXmerger,shareholderapprovalappearsmorelikelythannot.DOJreviewofboththependingCVS/AETandCI/ESRXdealsiscontinuingwithanannouncementsexpectedbyyear-end.Additionally,overthenextmonthorso,weshouldhavebetterclarityonthe2019HIXparticipation.Separately,inOctober,CMSwillreleaseSTARratingsdataforthe2020paymentyear,aswellasMAplanofferingdetailsfor2019.WeexpectMCOstodiscuss2019headwindsandtailwindsontheirQ3earningscalls(HUMmayissueformal2019guidancewithQ3earnings).Finally,wemayseeadditionalproposalsreleasedregardingTrumpAdministrationeffortstoreducedrugcosts.■UNH&ANTMremainTopPicks,CIanAttractiveValuePlay.WebelieveUNHhasstrongvisibilityarounditstargeted13-16%annualEPSgrowth.Separately,forANTM,webelievevaluationsdonotfullyreflectthesignificantbenefitfrompotentialpositivecatalystsrelatedtoitsstrongfinancialflexibility,andnewPBMrelatedsavings.WithrespecttoCI,therecouldbesomenear-termsharevolatilityaroundtheshareholdervote.However,sharesaretradingata3.5-4.0xvaluationdiscounttothegroupavg.Weseethisgapnarrowingoverthenexttwelvemonths(irrespectiveoftheESRXdealoutcome),driving20%+sharepriceappreciation.15August2018ManagedCare2TableofContents2Q18EarningsFollow-up&Q&ANotes3KeyTakeawaysfrom2Q184Company-by-Company2Q18Recap6Aetna........................................................................................................................6Anthem.....................................................................................................................6Cigna........................................................................................................................7Centene....................................................................................................................8Humana....................................................................................................................9UnitedHealthGroup...............................................................................................10PricePerformance&Valuation12IndustryOperatingStatistics15CommercialEnrollment..........................................................................................15CommercialFully-Insured(“Risk-based”)Enrollment15CommercialSelf-Insured(“Non-Risk/ASObased”)Enrollment16ManagedMedicaidEnrollment...............................................................................17MedicareAdvantageEnrollment............................................................................18PDPEnrollmentTrends.........................................................................................19MLR/UtilizationTrends...........................................................................................20ConsolidatedMLRTrends20CommercialMLRTrends20InvestmentIncomeTrends......................................................