November 2, 2017 / 8:27 PM / a year ago

Molina posts strong revenue growth, hits cost-cut target

(Reuters) - U.S. health insurer Molina Healthcare Inc (MOH.N) reported a bigger-than-expected quarterly revenue and said it has already hit its cost-cutting target for the year, amid a restructuring drive aimed at helping it better navigate an uncertain market.

The company’s shares, up about 27 percent so far this year, gained about 9 percent in after-market trading on Thursday.

President Donald Trump’s move to scrap billions of dollars in subsidies for Obamacare has unsettled health insurers who were using the benefits to give low-income families discounts. Molina specializes in Obamacare and Medicaid health plans.

Its Obamacare business has not been doing well since late last year, and in August the company pulled its full-year earnings forecast, said it would exit two Obamacare markets and lay off about 7 percent of its workforce by the end of the year.

As part of that restructuring plan, Molina had also set a target to lower expenses by $300 million to $400 million, on an annual run-rate basis, by the end of 2018, and by about $200 million by the end of this year.

“We believe that we have already reached our goal for 2017, and have lowered annualized run rate expenses by $200 million,” Chief Executive Joseph White said on a conference call.

The insurer did not report any impact of the subsidy cuts in the third quarter. But it said current-quarter pre-tax income could be hit by about $85 million if the Centers for Medicare and Medicaid Services pulls back its reimbursement this year itself.

Molina’s revenue rose nearly 11 percent to $5.03 billion in the latest quarter, beating analysts estimates of $4.96 million, according to Thomson Reuters I/B/E/S.

Its medical care ratio, the amount an insurer spends on medical claims compared with the premiums it earns, improved to 88.3 percent from 89.4 percent.

Leerink Research analyst Ana Gupte said in a note that Molina’s results were decent and “clears the decks” for Joseph Zubretsky to take over as chief executive from Nov. 6.

Molina said last month Zubretsky would replace Joseph White as CEO. White has been interim CEO since May when the insurer fired the Molina brothers, sons of the company’s founder.

The Long Beach, California-based company reported a net loss of $97 million in the quarter, which included impairment and restructuring costs of about $247 million. It earned $42 million in the year-earlier quarter.

Reporting by Divya Grover in Bengaluru; Editing by Shounak Dasgupta and Savio D'Souza

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