INDIANAPOLIS (AP) – Rapidly growing health insurer Anthem Inc. reported a 67 percent jump in second quarter earnings Thursday and came in ahead of Wall Street expectations on the strength of membership gains.

Anthem, the Blue Cross Blue Shield provider in Maine and eight other states, also increased its projection of future earnings.

Enrollment in benefits plans grew to 11.7 million members – a 41 percent increase compared with a year ago including Anthem’s acquisition last summer of Trigon Healthcare, and a 10 percent increase not counting customers gained in that $4 billion deal.

For the April-June period, Indianapolis-based Anthem reported net income of $177.3 million, or $1.25 per share. That compared with a profit of $106.2 million, or $1.01 per share, for the year-ago period.

Operating revenue increased to $4.1 billion from $2.8 billion – a 43 percent gain overall, and 10 percent not counting the acquisition of Virginia-based Trigon.

Excluding one-time gains and losses in both periods, Anthem posted a profit of $184 million, or $1.30 per share, compared with $104.5 million and 99 cents a share in 2002.

The performance beat by a nickel the consensus estimate of analysts surveyed by Thomson First Call, who forecast a profit of $1.25 per share.

Anthem, the nation’s fifth-largest publicly traded health benefits company, increased its projection of full-year per-share earnings from the $5.00-$5.05 range to $5.10-$5.15 per share, despite forecasts of continued growth in medical costs. Analysts surveyed by Thomson First Call had forecast $5.09 per share for 2003.

Anthem also raised its forecast of 2003 membership growth to the 7 percent to 8 percent range, up from an earlier 5 percent to 7 percent.

“We expect our current momentum to continue,” Larry Glasscock, Anthem’s chairman, president and chief executive, told analysts in a conference call.

“We expect our current momentum to continue,” Larry Glasscock, Anthem’s chairman, president and chief executive, told analysts in a conference call.

But Anthem shares were down $2.81, or 3.6 percent, to $76.16 in midday trading on the New York Stock Exchange.

Thomas A. Carroll, an industry analyst with Legg Mason, attributed the decline to “sector switching” by investors responding to Thursday’s announcement that the economy grew at a much stronger-than-expected pace in the second quarter. The news led investors to abandon health care stocks – generally seen as safe investments in tough times – for higher-risk investments regarded as good bets in an improving economy.

Carroll said no negative news came out of Anthem’s earnings report. Anthem’s membership growth came “in a market where we’re seeing other large managed care companies see flat or much lower growth,” he said.

Anthem’s 67 percent earnings growth in the second quarter followed gains of 92 percent in the first quarter, 96 percent in the fourth quarter, and 60 percent growth for all of 2002.

For the first six months of 2003, earnings including one-time gains and losses rose to $369 million, or $2.61 per share, compared with $206 million and $1.96 per share in 2002.

Anthem is the Blue Cross and Blue Shield licensee in nine states: Indiana, Kentucky, Ohio, Connecticut, New Hampshire, Colorado, Nevada and Maine, and part of Virginia.

The company has about 20,000 employees, including 3,600 in Indiana, where it overtook drug maker Eli Lilly and Co. last year as the state’s largest company based on revenue.

State regulators last year blocked Anthem’s proposal to acquire the Blues plan in Kansas. The Kansas Supreme Court has yet to rule on Anthem’s attempt to overturn the decision, and entered its summer recess without ruling.

Glasscock said Anthem now expects a ruling either late in the third quarter or in the fourth quarter.

Anthem also is awaiting findings expected in the fall from a yearlong investigation of the company’s medical billing. Indiana insurance regulators ordered the review in response to doctors’ complaints that Anthem reimbursed them slowly or inadequately for many claims.

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On the Net:

http://www.anthem.com

AP-ES-07-31-03 1151EDT