$Anthem Inc (ANTM.US) $Is second only toUnitedHealth Group IncThe second largest health insurance giant in the United States. The company's shares have outperformed the S & P 500 and S & P healthcare for years, and the company has risen every year since 2013 and has risen more than eightfold so far.

It has hit record highs so far this year, but after a correction on Friday, the annual increase narrowed to 8.74%.

Anthem Inc formerly operated under the name Anthem Inc Blue Cross (an Sen Blue Cross) in California after WellPoint acquired and merged other health insurance companies in WellPoint,2004. It was changed to Anthem Inc in December 2014.The company recently plans to change its name to Elevance Health, which aims to highlight the company's extensive business coverage, not just providing health insurance services.

As beforeMentionThe United States is the only developed country in the world that does not have a universal health insurance system, which is composed of relevant government agencies and commercial health insurance. Health insurance at all levels of government mainly covers specific groups such as the elderly, the poor, soldiers (and veterans) and prisoners. For the average American under the age of 65Commercial health insurance is the main way for them to seek health insurance, which also gives birth to the special profession of drug welfare manager, which connects the interests of health insurance companies, pharmaceutical wholesale enterprises and patients.

The second largest health insurance giant in the United States

Anthem Inc in 2021Ranked 50th in the Fortune 500.. Operating income in 2021 is about $137 billion and net profit is $6.1 billion.

Anthem Inc differs from his peers in that it is the largest single provider covered by the Blue Cross Blue Shield (Blue Cross Blue Shield) brand and operates as a licensee of the Blue Cross Blue Shield Association (Blue Cross Blue Shield Association) in 14 states. Through acquisitions such as amergroup in 2012 and MMM,Anthem in 2021, it has also expanded beyond these states through government-funded programs such as Medicaid (Medicaid).

Anthem Inc is a typical combination of commercial and government business. specifically, he mainly provides the following products and services:

• Provide a range of web-based managed health care benefit plans to individuals, groups, Medicaid (Medicaid) and Medicare (Medicare) markets.

• Provide self-financing customers with a range of managed medical services, including claim processing, stop-loss insurance, provider network access, medical cost management, disease management and health plans, actuarial services and other administrative services.

• Provides services to the federal government related to the Federal employee Program, which manages the Federal employee Health benefits (FEHB) program and operates as a licensee of the Blue Cross and Blue Shield Association.
  

• A range of professional services are also provided, including Pharmaceutical Services Management (PBM) and dentistry, ophthalmology, life, disability and supplementary health insurance benefits, as well as integrated health services.
  

It is worth mentioning that the price of medicine for Americans after seeking medical treatment is not determined by the government, but by the pharmaceutical service management companies (Pharmacy Benefit Manager, PBM) entrusted by various health insurance companies to negotiate the price with the drug companies. PBM is the lower reaches of American health insurance companies, docking with health insurance companies to negotiate prices with pharmaceutical companies, so as to reduce drug costs and create value. PBM's main business is to provide drugs, medication instructions, payment management, etc., according to the needs put forward by health insurance companies, and will not directly face patients. If health insurance companies acquire downstream PBM enterprises, they can gain the following advantages:

1. Get a large number of member information of PBM

2. Insurance companies can save a lot of money by changing from the original payer (paying PBM) to paying themselves.

3. The advantage of obtaining the disguised pricing power of PBM and the great increase of the negotiation power of pharmaceutical companies.

Anthem Inc set up his own PBM service provider IngenioRx in October 2017, so Anthem Inc can be more transparent and reduce external costs, while having a way to provide more complete services.

The company divides the business into four departments to operate:Commercial and professional business, government business, IngenioRx and others. Among themGovernment business accounts for the largest proportion of revenueQ1 accounts for about 63% of total revenue this year, and its growth has accelerated in the past two years.

From the perspective of income structure, most of Anthem Inc's income is premium income. This year, Q1 has total revenue of US $37.886 billion, of which premium income accounts for 86.5%, product income accounts for 8.7%, and the rest is management fees and other income.

Increase in the number of members to build a moat

For medical insurance enterprises, economies of scale and network layout are economic moats.The larger the number of members, the more information can be calculated and used, and the cost can be saved; at the same time, the more members, the greater the popularity, attracting more potential customers to join.

As of March 31, 2022Anthem Inc has nearly 47 million medical members.It has increased by 3.3 million over the same period last year, and the gap with the number of UnitedHealth Group Inc members is narrowing. Among themMembers of federal employee health benefits are growing the fastest.

Medicaid membership continued to grow in the first quarter of 2022 due to the suspension of recertification due to COVID-19 's epidemic, which is expected to be suspended until at least the third quarter of this year, the company said in its financial report. Once the state government resumes certification (some states may not do so until 2023), the company's Medicaid membership is expected to decline.

In addition, the acquisition of MMM in the second quarter of last year and the launch of the HealthyBlue managed Care Alliance in North Carolina in the third quarter of last year also contributed to the growth of membership.

Anthem Inc's revenue in the first quarter of this year rose 17.6 per cent year-on-year to $32.4 billion, while profit rose 8.4 per cent to $1.81 billion, both exceeding market expectations.The increase in revenue was mainly due to the increase in the number of members, the increase in premium rates for commercial insurance business, and the increase in revenue from pharmacy products related to IngenioRx.

After the Q1 results were announced, Wall Street banks raised their target prices one after another:

Morgan Stanley raised his target price from $518 to $607 per share.

Cowen raised its target price to $642 per share from $472a share

Credit Suisse raised its target price to $584 per share from $518

Goldman Sachs Group raised his target price to $605 a share from $527.

Defensive sectors such as health care are favored.

At a time of global market turmoil, safe haven assets are favored by investors and Wall Street analysts. Inflow in the first quarterHealth Care Select Industry Index ETF-SPDR (XLV.US) $The cash reached a record level.

Mike Wilson, chief US equity strategist and chief investment officer of Morgan Stanley, recently said that as the profitability of ordinary companies is facing challenges, the bottom line of investment is to adhere to defensive industries and stocks.

Capital flow data show that money has also "cleverly" shifted to sectors such as health care, utilities and consumer necessities, often referred to as defensive sectors.

Lauren Goodwin, an economist and portfolio strategist at New York Life Investments, says its multi-asset team has shifted its portfolio to commodities, healthcare and utilities in recent weeks and reduced its exposure to financial and industrial stocks.