Elevance stock unfazed by latest BCBS Louisiana setback

Elevance Health Inc. shares remained steady this week in spite of news that the insurance giant's deal to purchase Blue Cross Blue Shield of Louisiana, or BCBSLA, had again stalled.

BCBSLA on Feb. 14 announced it had paused the transaction and was canceling policyholder meetings, adding in a news release that its members needed more time to "understand the benefits" of the deal.

Despite the news, Elevance's stock value remained largely unchanged, hitting $508.83 by close of trading Thursday, up from $505.31 the day prior and $506.08 at close of trading on Feb. 9.

This is the latest setback since the Indianapolis-based managed care insurer announced its intent to buy BCBSLA for approximately $3.5 billion more than a year ago.

While Elevance and BCBS of Louisiana both likely remain committed to the deal, Elevance has likely tempered expectations that it will close soon, according to Stephens analyst Scott Fidel.

"Elevance's pending acquisition of Blue Cross Blue Shield of Louisiana has faced a number of twists and turns in reaching regulatory approval," Fidel said. "While this is largely unsurprising given it is the first significant acquisition of a non-profit Blue plan by Elevance in multiple years, the deal seems to have a bit of a further hike to go before reaching the finish line, raising uncertainty on whether it will close within the targeted first half of 2024 timeframe."

This is the second time the deal has hit a snag, following a previous pause in September 2023 amid regulatory concerns before being resuming in December following the election of Tim Temple, the new Louisiana Commissioner of Insurance.

Overall performance

Elevance has generally fared better than many other US managed care insurers, with higher-than-anticipated medical costs and Medicaid membership losses marring fourth-quarter 2023 earnings.

By close of business Thursday, Elevance's stock had risen 6.3% from the start of the year, behind only The Cigna Group, which saw its stock value climb 9.4% in the period. UnitedHealth Group Inc. saw its stock decline 3.4%, while Centene Corp. saw its stock rise by 1.9% during the same time.

Humana Inc., which posted the most dismal fourth-quarter earnings, saw the sharpest stock value decline and was trading 22.6% lower than where it began the year.

The S&P 500 and S&P Insurance Index largely matched Elevance's value growth, posting 6.05% and 8.81% growth during the same period.

AIG, Progressive fare well

American International Group Inc.'s stock remained largely unchanged following fourth-quarter results that exceeded consensus estimates.

The insurance giant Feb. 14 reported fourth quarter revenue of $12.72 billion, up 4.6% from the year before. Earnings per share came in at $1.79, up from $1.36 in the prior-year quarter.

By close of business Thursday, AIG's stock rose 0.3% from Tuesday, the day prior to its earnings call.

Piper Sandler analyst Paul Newsome in a research note ranked AIG as "overweight," acknowledging that results were largely in line with analyst expectations.

"Investors seemed to be a little concerned about the smaller amount of favorable reserve development in the quarter, but we are less concerned given the source is primarily short-tailed lines and not casualty reserves problems seen with other insurers," Newsome wrote.

The Progressive Corp.'s stock saw a slight bump to its value after posting January EPS that exceeded prior year results, trading 3.9% up since Tuesday.

The property & casualty insurer reported January EPS of $1.16, up from $0.43 in January 2023.

The insurer has a strong trajectory for 2024, wrote William Blair analyst Adam Klauber in a research note, highlighting the insurer's strong level of earnings progression.

"Auto core losses continued their strong performance at 70% for the month, driving a consolidated core loss ratio of 69%," Klauber wrote. "The expense ratio ticked up to 18%, from 16% in December, a good signal that Progressive has begun to increase its advertising spend as it shifts into growth mode."