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Anthem Reports Fourth Quarter and Full Year 2019 Results Reflecting Solid Performance
  • Fourth quarter net income was $3.62 per share, including net negative adjustment items of $0.26 per share. Adjusted net income was $3.88* per share.
  • Full year net income was $18.47 per share, including net negative adjustment items of $0.97 per share. Adjusted net income was $19.44* per share.
  • Fourth quarter operating revenue grew 16.4% year-over-year to $27.1 billion. Full year operating revenue grew 12.9% year-over-year to $103.1 billion.
  • Medical enrollment ended the year at 41 million lives, with growth of 1.1 million members year-to-date, driven by the risk-based businesses.
  • Full year 2020 GAAP net income is expected to be greater than $21.44 per share. Adjusted net income is expected to be greater than $22.30* per share, an increase of 14.7% versus 2019, including approximately $2.30 from the accelerated launch of IngenioRx.
  • Quarterly dividend increased by nearly 19% to $0.95 per share.

INDIANAPOLIS--(BUSINESS WIRE)--Jan. 29, 2020-- Anthem, Inc. (NYSE: ANTM) reported fourth quarter and full year financial 2019 results that reflect double-digit top and bottom line growth and the successful launch of IngenioRx.

“Anthem delivered strong results to close out 2019 featuring the successful launch of IngenioRx, as well as our largest organic risk-based growth in more than a decade,” said Gail K. Boudreaux, President and CEO. “We have strong momentum moving into 2020 and we will continue to deliver on our commitments to all those we serve.”

* Refer to the GAAP reconciliation tables.

CONSOLIDATED HIGHLIGHTS

Membership: Medical enrollment totaled 41.0 million members at December 31, 2019, an increase of 1.1 million, or 2.7 percent, from December 31, 2018. Total risk enrollment grew by 931 thousand lives, or 6.4 percent, and fee-based enrollment grew by 131 thousand lives, or 0.5 percent. Government Business enrollment increased by 854 thousand lives as the Company experienced growth in Medicaid and Medicare. Commercial & Specialty Business enrollment increased by 208 thousand lives driven by growth in the National and Individual businesses.

During the fourth quarter of 2019, medical enrollment increased sequentially by 16 thousand lives, reflecting growth in the Local Group, National, and Medicare businesses.

Operating Revenue: Operating revenue was $27.1 billion in the fourth quarter of 2019, an increase of $3.8 billion, or 16.4 percent, versus the prior year quarter. The increase in operating revenue reflected higher premium revenue from membership growth across our businesses and rate increases to cover overall cost trends. The increase in operating revenue was further driven by growth in our value-added services, including our pharmacy and integrated health offerings, partially offset by the one year waiver of the health insurance tax in 2019.

Benefit Expense Ratio: The benefit expense ratio was 89.0 percent in the fourth quarter of 2019, an increase of 220 basis points from 86.8 percent in the prior year quarter. The increase, as expected, was primarily driven by the one year waiver of the health insurance tax in 2019.

Medical claims reserves established at December 31, 2018 developed in line with the Company’s expectations during 2019.

Medical Cost Trend: For the full year 2019, Local Group medical cost trend was approximately 6.0%. The Company anticipates Local Group medical cost trend will be in the range of 4.0% +/- 50 basis points in 2020, including the benefit of improved pharmacy cost from the launch of IngenioRx and other medical cost management initiatives.

Days in Claims Payable: Days in Claims Payable was 38.0 days as of December 31, 2019, a decrease of 1.8 days from September 30, 2019, but an increase of 1.8 days as compared to December 31, 2018.

SG&A Expense Ratio: The SG&A expense ratio was 12.9 percent in the fourth quarter of 2019, a decrease of 260 basis points from 15.5 percent in the fourth quarter of 2018. The decrease, as expected, was primarily driven by growth in operating revenue and the one year waiver of the health insurance tax in 2019.

Operating Cash Flow: Operating cash flow in the fourth quarter of 2019 was $1.3 billion, or 1.4 times net income, which represents an increase of $864 million compared to the fourth quarter of 2018. Operating cash flow was $6.1 billion, or 1.3 times net income for the year ending December 31, 2019.

Share Repurchase Program: During the fourth quarter of 2019, the Company repurchased 1.2 million shares of its common stock for $306 million, or a weighted average price of $260.87. For the full year, the Company repurchased 6.3 million shares of its stock for $1.7 billion, or a weighted average price of $268.65. As of December 31, 2019, the Company had approximately $3.8 billion of Board-approved share repurchase authorization remaining.

Cash Dividend: During the fourth quarter of 2019, the Company paid a quarterly dividend of $0.80 per share, representing a distribution of cash totaling $202 million.

On January 28, 2020, the Audit Committee declared a first quarter 2020 dividend to shareholders of $0.95 per share, reflecting an increase of 18.8 percent from the previous quarterly dividend. On an annualized basis, this equates to a dividend of $3.80 per share. The first quarter dividend is payable on March 27, 2020 to shareholders of record at the close of business on March 16, 2020.

Investment Portfolio & Capital Position: During the fourth quarter of 2019, the Company recorded net realized gains of $24 million and other-than-temporary impairment losses totaling $17 million. During the fourth quarter of 2018, the Company recorded net realized losses of $185 million and other-than-temporary impairment losses totaling $8 million.

As of December 31, 2019, the Company’s net unrealized gain position in the investment portfolio was $673 million, consisting of fixed maturity securities. As of December 31, 2019 cash and investments at the parent company totaled approximately $2.7 billion.

REPORTABLE SEGMENTS

Anthem, Inc. has three reportable segments: Commercial & Specialty Business (comprised of the Local Group, National Accounts, Individual and Specialty businesses); Government Business (comprised of the Medicaid, Medicare, and Federal Health Products & Services businesses); and Other (comprised of IngenioRx, the Diversified Business Group, and corporate expenses not allocated to our other reportable segments).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anthem, Inc.

 

 

Reportable Segment Highlights

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

Three Months Ended December 31

 

Twelve Months Ended December 31

 

 

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

 

 

Operating Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

$9,328

 

$8,843

 

5.5

%

 

$37,421

 

$35,782

 

4.6

%

 

 

Government Business

16,213

 

14,397

 

12.6

%

 

62,632

 

55,348

 

13.2

%

 

 

Other

3,845

 

411

 

835.5

%

 

7,695

 

1,519

 

406.6

%

 

 

Eliminations

(2,254)

 

(347)

 

NM2

 

(4,607)

 

(1,308)

 

NM2

 

 

Total Operating Revenue1

$27,132

 

$23,304

 

16.4

%

 

$103,141

 

$91,341

 

12.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Gain / (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

$535

 

$316

 

69.3

%

 

$4,046

 

$3,600

 

12.4

%

 

 

Government Business

583

 

451

 

29.3

%

 

2,054

 

1,928

 

6.5

%

 

 

Other

(20)

 

(17)

 

NM2

 

(101)

 

(102)

 

NM2

 

 

Total Operating Gain1

$1,098

 

$750

 

46.4

%

 

$5,999

 

$5,426

 

10.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

5.7

%

 

3.6

%

 

210 bp

 

10.8

%

 

10.1

%

 

70 bp

 

 

Government Business

3.6

%

 

3.1

%

 

50 bp

 

3.3

%

 

3.5

%

 

(20) bp

 

 

Total Operating Margin1

4.0

%

 

3.2

%

 

80 bp

 

5.8

%

 

5.9

%

 

(10) bp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See “Basis of Presentation”.
(2)"NM" = calculation not meaningful.

Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled $535 million in the fourth quarter of 2019, an increase of $219 million, or 69.3 percent, from $316 million in the fourth quarter of 2018. The increase is primarily driven by the launch of IngenioRx and greater penetration of value-added services, partially offset by margin normalization in the Individual business.

Government Business: Operating gain in the Government Business segment was $583 million in the fourth quarter of 2019, an increase of $132 million, or 29.3 percent, from $451 million in the fourth quarter of 2018. The increase is due to higher premiums from rate adjustments and membership growth in the Medicaid business, partially offset by higher selling, general, and administrative spend to support growth.

Other: The Company reported an operating loss of $20 million in the Other segment for the fourth quarter of 2019, compared with an operating loss of $17 million in the prior year quarter.

OUTLOOK

Full Year 2020:

  • GAAP net income is expected to be greater than $21.44 per share, including approximately $0.86 per share of net unfavorable items. Excluding these items, adjusted net income is expected to be greater than $22.30* per share.
  • Medical membership is expected to be in the range of 41.9 - 42.3 million. Fully-insured membership is expected to be in the range of 16.0 - 16.3 million and self-funded membership is expected to be in the range of 25.9 - 26.0 million.
  • Operating revenue is expected to be approximately $117 billion, including premium revenue of $101 billion - $103 billion.
  • Cost of products sold is expected to be in the range of $6.9 billion - $7.3 billion.
  • Benefit expense ratio is expected to be in the range of 85.8% plus or minus 50 basis points.
  • Local Group medical cost trend is expected to be 4.0% plus or minus 50 basis points, including the benefit of lower pharmacy cost from the launch of IngenioRx and medical cost management initiatives.
  • SG&A ratio is expected to be in the range of 12.8% plus or minus 30 basis points.
  • Operating cash flow is expected to be greater than $6.4 billion.
  • Investment income is expected to be $970 million.
  • Effective tax rate is expected to be between 24.0% - 26.0%.
  • Share count is expected to be between 255 - 257 million.

* Refer to the GAAP reconciliation tables.

Basis of Presentation

  1. Operating revenue and operating gain are the key measures used by management to evaluate performance in each of its reporting segments, allocate resources, set incentive compensation targets and to forecast future operating performance. Operating gain is calculated as total operating revenue less benefit expense, cost of products sold and selling, general and administrative expense. It does not include net investment income, net realized gains/losses on financial instruments, other-than-temporary impairment losses recognized in income, interest expense, amortization of other intangible assets, gains/losses on extinguishment of debt or income taxes, as these items are managed in a corporate shared service environment and are not the responsibility of operating segment management. Refer to the GAAP reconciliation tables.
  2. Operating margin is defined as operating gain divided by operating revenue.

Conference Call and Webcast

Management will host a conference call and webcast today at 8:30 a.m. Eastern Standard Time (“EST”) to discuss the company’s fourth quarter results and outlook. The conference call should be accessed at least 15 minutes prior to the start of the call with the following numbers:

844-721-7239 (Domestic)

   

866-207-1041 (Domestic Replay)

409-207-6953 (International)

   

402-970-0847 (International Replay)

The access code for today's conference call is 6293698. The access code for the replay is 9477514. The replay will be available from 1:00 p.m. EST today, until the end of the day on February 13, 2020. The call will also be available through a live webcast at www.antheminc.com under the “Investors” link. A webcast replay will be available following the call.

About Anthem, Inc.

Anthem is a leading health benefits company dedicated to improving lives and communities, and making healthcare simpler. Through its affiliated companies, Anthem serves more than 79 million people, including 41 million within its family of health plans. We aim to be the most innovative, valuable and inclusive partner. For more information, please visit www.antheminc.com or follow @AnthemInc on Twitter.

Anthem, Inc.

Membership Summary

(Unaudited and in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change from

Medical Membership

December 31,
2019

 

December 31,
2018

 

September 30,
2019

 

December 31,
2018

 

September 30,
2019

Customer Type

 

 

 

 

 

 

 

 

 

Local Group

15,682

 

 

15,733

 

 

15,659

 

 

(0.3

)%

 

0.1

%

Individual

684

 

 

655

 

 

711

 

 

4.4

%

 

(3.8

)%

 

 

 

 

 

 

 

 

 

 

National:

 

 

 

 

 

 

 

 

 

National Accounts

7,596

 

 

7,588

 

 

7,666

 

 

0.1

%

 

(0.9

)%

BlueCard®

6,060

 

 

5,838

 

 

5,967

 

 

3.8

%

 

1.6

%

Total National

13,656

 

 

13,426

 

 

13,633

 

 

1.7

%

 

0.2

%

 

 

 

 

 

 

 

 

 

 

Medicare:

 

 

 

 

 

 

 

 

 

Medicare Advantage

1,214

 

 

1,006

 

 

1,203

 

 

20.7

%

 

0.9

%

Medicare Supplement

905

 

 

846

 

 

893

 

 

7.0

%

 

1.3

%

Total Medicare

2,119

 

 

1,852

 

 

2,096

 

 

14.4

%

 

1.1

%

 

 

 

 

 

 

 

 

 

 

Medicaid

7,265

 

 

6,716

 

 

7,293

 

 

8.2

%

 

(0.4

)%

Federal Employee Health Benefits

1,594

 

 

1,556

 

 

1,592

 

 

2.4

%

 

0.1

%

Total Medical Membership

41,000

 

 

39,938

 

 

40,984

 

 

2.7

%

 

%

Funding Arrangement

 

 

 

 

 

 

 

 

 

Self-Funded

25,418

 

 

25,287

 

 

25,368

 

 

0.5

%

 

0.2

%

Fully-Insured

15,582

 

 

14,651

 

 

15,616

 

 

6.4

%

 

(0.2

)%

Total Medical Membership

41,000

 

 

39,938

 

 

40,984

 

 

2.7

%

 

%

Reportable Segment

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

30,022

 

 

29,814

 

 

30,003

 

 

0.7

%

 

0.1

%

Government Business

10,978

 

 

10,124

 

 

10,981

 

 

8.4

%

 

%

Total Medical Membership

41,000

 

 

39,938

 

 

40,984

 

 

2.7

%

 

%

Other Membership

 

 

 

 

 

 

 

 

 

Life and Disability Members

5,259

 

 

4,795

 

 

4,970

 

 

9.7

%

 

5.8

%

Dental Members

5,962

 

 

5,807

 

 

5,942

 

 

2.7

%

 

0.3

%

Dental Administration Members

5,516

 

 

5,327

 

 

5,526

 

 

3.5

%

 

(0.2

)%

Vision Members

7,261

 

 

6,946

 

 

7,232

 

 

4.5

%

 

0.4

%

Medicare Part D Standalone Members

283

 

 

309

 

 

285

 

 

(8.4

)%

 

(0.7

)%

Anthem, Inc.

Consolidated Statements of Income

(Unaudited)

 

 

 

 

 

 

 

(In millions, except per share data)

 

Three Months Ended
December 31

 

 

 

 

2019

 

2018

 

Change

Revenues

 

 

 

 

 

 

Premiums

 

$

24,036

 

 

$

21,819

 

 

10.2

%

Administrative fees and other revenue

 

3,096

 

 

1,485

 

 

108.5

%

Total operating revenue

 

27,132

 

 

23,304

 

 

16.4

%

Net investment income

 

268

 

 

262

 

 

2.3

%

Net realized gains/(losses) on financial instruments

 

24

 

 

(185

)

 

NM

Other-than-temporary impairment losses on investments:

 

 

 

 

 

 

Total other-than-temporary impairment losses on investments

 

(17

)

 

(9

)

 

NM

Portion of other-than-temporary impairment losses recognized in other comprehensive income

 

 

 

1

 

 

NM

Other-than-temporary impairment losses recognized in income

 

(17

)

 

(8

)

 

NM

 

 

 

 

 

 

 

Total revenues

 

27,407

 

 

23,373

 

 

17.3

%

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

Benefit expense

 

21,383

 

 

18,936

 

 

12.9

%

Cost of products sold

 

1,149

 

 

 

 

NM

Selling, general and administrative expense

 

3,502

 

 

3,618

 

 

(3.2

)%

Interest expense

 

190

 

 

189

 

 

0.5

%

Amortization of other intangible assets

 

82

 

 

94

 

 

(12.8

)%

Loss/(gain) on extinguishment of debt

 

3

 

 

(6

)

 

NM

 

 

 

 

 

 

 

Total expenses

 

26,309

 

 

22,831

 

 

15.2

%

 

 

 

 

 

 

 

Income before income tax expense

 

1,098

 

 

542

 

 

102.6

%

 

 

 

 

 

 

 

Income tax expense

 

164

 

 

118

 

 

39.0

%

 

 

 

 

 

 

 

Net income

 

$

934

 

 

$

424

 

 

120.3

%

 

 

 

 

 

 

 

Net income per diluted share

 

$

3.62

 

 

$

1.61

 

 

124.8

%

 

 

 

 

 

 

 

Diluted shares

 

258.0

 

 

264.2

 

 

(2.3

)%

 

 

 

 

 

 

 

Benefit expense as a percentage of premiums

 

89.0

%

 

86.8

%

 

220

bp

Selling, general and administrative expense as a percentage of total operating revenue

 

12.9

%

 

15.5

%

 

(260

)bp

Income before income taxes as a percentage of total revenue

 

4.0

%

 

2.3

%

 

170

bp

                   

"NM" = calculation not meaningful

                 

 

Anthem, Inc.

Consolidated Statements of Income

(Unaudited)

 

 

 

 

 

 

 

(In millions, except per share data)

 

Twelve Months Ended
December 31

 

 

 

 

2019

 

2018

 

Change

Revenues

 

 

 

 

 

 

Premiums

 

$

94,173

 

 

$

85,421

 

 

10.2

%

Administrative fees and other revenue

 

8,968

 

 

5,920

 

 

51.5

%

Total operating revenue

 

103,141

 

 

91,341

 

 

12.9

%

Net investment income

 

1,005

 

 

970

 

 

3.6

%

Net realized gains/(losses) on financial instruments

 

114

 

 

(180

)

 

NM

Other-than-temporary impairment losses on investments:

 

 

 

 

 

 

Total other-than-temporary impairment losses on investments

 

(53

)

 

(29

)

 

NM

Portion of other-than-temporary impairment losses recognized in other comprehensive income

 

6

 

 

3

 

 

100.0

%

Other-than-temporary impairment losses recognized in income

 

(47

)

 

(26

)

 

NM

 

 

 

 

 

 

 

Total revenues

 

104,213

 

 

92,105

 

 

13.1

%

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

Benefit expense

 

81,786

 

 

71,895

 

 

13.8

%

Cost of products sold

 

1,992

 

 

 

 

NM

Selling, general and administrative expense

 

13,364

 

 

14,020

 

 

(4.7

)%

Interest expense

 

746

 

 

753

 

 

(0.9

)%

Amortization of other intangible assets

 

338

 

 

358

 

 

(5.6

)%

Loss on extinguishment of debt

 

2

 

 

11

 

 

(81.8

)%

 

 

 

 

 

 

 

Total expenses

 

98,228

 

 

87,037

 

 

12.9

%

 

 

 

 

 

 

 

Income before income tax expense

 

5,985

 

 

5,068

 

 

18.1

%

 

 

 

 

 

 

 

Income tax expense

 

1,178

 

 

1,318

 

 

(10.6

)%

 

 

 

 

 

 

 

Net income

 

$

4,807

 

 

$

3,750

 

 

28.2

%

 

 

 

 

 

 

 

Net income per diluted share

 

$

18.47

 

 

$

14.19

 

 

30.2

%

 

 

 

 

 

 

 

Diluted shares

 

260.3

 

 

264.2

 

 

(1.5

)%

 

 

 

 

 

 

 

Benefit expense as a percentage of premiums

 

86.8

%

 

84.2

%

 

260

bp

Selling, general and administrative expense as a percentage of total operating revenue

 

13.0

%

 

15.3

%

 

(230

)bp

Income before income taxes as a percentage of total revenue

 

5.7

%

 

5.5

%

 

20

bp

                   

"NM" = calculation not meaningful

                 

 

Anthem, Inc.

Consolidated Balance Sheets

 

(In millions)

December 31,
2019

 

December 31,
2018

Assets

(Unaudited)

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

4,937

 

 

$

3,934

 

Fixed maturity securities, current

19,676

 

 

16,692

 

Equity securities, current

1,009

 

 

1,493

 

Other invested assets, current

13

 

 

21

 

Accrued investment income

173

 

 

162

 

Premium receivables

5,173

 

 

4,465

 

Self-funded receivables

2,411

 

 

2,278

 

Other receivables

2,634

 

 

2,558

 

Income taxes receivable

335

 

 

10

 

Securities lending collateral

353

 

 

604

 

Other current assets

2,319

 

 

2,104

 

Total current assets

39,033

 

 

34,321

 

 

 

 

 

Long-term investments:

 

 

 

Fixed maturity securities

505

 

 

487

 

Equity securities

30

 

 

33

 

Other invested assets

4,228

 

 

3,726

 

Property and equipment, net

3,133

 

 

2,735

 

Goodwill

20,500

 

 

20,504

 

Other intangible assets

8,674

 

 

9,007

 

Other noncurrent assets

1,350

 

 

758

 

Total assets

$

77,453

 

 

$

71,571

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

Liabilities

 

 

 

Current liabilities:

 

 

 

Policy liabilities:

 

 

 

Medical claims payable

$

8,842

 

 

$

7,454

 

Reserves for future policy benefits

85

 

 

75

 

Other policyholder liabilities

3,050

 

 

2,590

 

Total policy liabilities

11,977

 

 

10,119

 

Unearned income

1,017

 

 

902

 

Accounts payable and accrued expenses

4,198

 

 

4,959

 

Security trades pending payable

84

 

 

197

 

Securities lending payable

351

 

 

604

 

Short-term borrowings

700

 

 

1,145

 

Current portion of long-term debt

1,598

 

 

849

 

Other current liabilities

3,692

 

 

3,190

 

Total current liabilities

23,617

 

 

21,965

 

 

 

 

 

Long-term debt, less current portion

17,787

 

 

17,217

 

Reserves for future policy benefits, noncurrent

674

 

 

706

 

Deferred tax liabilities, net

2,227

 

 

1,960

 

Other noncurrent liabilities

1,420

 

 

1,182

 

Total liabilities

45,725

 

 

43,030

 

 

 

 

 

Shareholders’ equity

 

 

 

Common stock

3

 

 

3

 

Additional paid-in capital

9,448

 

 

9,536

 

Retained earnings

22,573

 

 

19,988

 

Accumulated other comprehensive loss

(296

)

 

(986

)

Total shareholders’ equity

31,728

 

 

28,541

 

Total liabilities and shareholders’ equity

$

77,453

 

 

$

71,571

 

Anthem, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 

 

 

(In millions)

Twelve Months Ended December 31

 

2019

 

2018

Operating activities

 

 

 

 

 

Net income

$4,807

 

 

$3,750

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Net realized gains on financial instruments

(114

)

 

180

 

Other-than-temporary impairment losses recognized in income

47

 

 

26

 

Loss on extinguishment of debt

2

 

 

11

 

Loss on disposal of assets

3

 

 

13

 

Deferred income taxes

81

 

 

91

 

Amortization, net of accretion

986

 

 

1,008

 

Depreciation expense

147

 

 

124

 

Share-based compensation

294

 

 

226

 

Changes in operating assets and liabilities:

 

 

 

 

 

Receivables, net

(1,053

)

 

(695

)

Other invested assets

(48

)

 

(1

)

Other assets

(170

)

 

(26

)

Policy liabilities

1,826

 

 

(1,059

)

Unearned income

116

 

 

(36

)

Accounts payable and accrued expenses

(593

)

 

122

 

Other liabilities

148

 

 

(25

)

Income taxes

(325

)

 

323

 

Other, net

(93

)

 

(205

)

Net cash provided by operating activities

6,061

 

 

3,827

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of fixed maturity securities

(10,487

)

 

(8,244

)

Proceeds from sales and maturities of fixed maturity securities

8,351

 

 

8,380

 

Purchases of equity securities

(11,825

)

 

(896

)

Proceeds from sales of equity securities

12,364

 

 

2,809

 

Purchases of other invested assets

(642

)

 

(531

)

Proceeds from sales of other invested assets

320

 

 

411

 

Changes in securities lending collateral

254

 

 

(149

)

Purchases of subsidiaries, net of cash acquired

 

 

(1,760

)

Net purchases of property and equipment

(1,077

)

 

(1,208

)

Other, net

(50

)

 

(71

)

Net cash used in investing activities

(2,792

)

 

(1,259

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Net repayments of commercial paper borrowings

(297

)

 

(107

)

Net repayments of short-term borrowings

(445

)

 

(130

)

Net proceeds from (repayments of) long-term borrowings

1,350

 

 

(849

)

Changes in securities lending payable

(254

)

 

150

 

Changes in bank overdrafts

(169

)

 

(210

)

Proceeds from sale of put options

 

 

1

 

Premiums paid on equity call options

(1

)

 

 

Proceeds from issuance of common stock under Equity Units stock purchase contracts

 

 

1,250

 

Repurchase and retirement of common stock

(1,701

)

 

(1,685

)

Change in collateral and settlements of debt-related derivatives

(34

)

 

23

 

Cash dividends

(818

)

 

(776

)

Proceeds from issuance of common stock under employee stock plans

187

 

 

173

 

Taxes paid through withholding of common stock under employee stock plans

(84

)

 

(81

)

Net cash used in financing activities

(2,266

)

 

(2,241

)

 

 

 

 

 

 

Effect of foreign exchange rates on cash and cash equivalents

 

 

(2

)

 

 

 

 

 

 

Change in cash and cash equivalents

1,003

 

 

325

 

Cash and cash equivalents at beginning of year

3,934

 

 

3,609

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

$4,937

 

 

$3,934

 

Anthem, Inc.

Reconciliation of Medical Claims Payable

 

 

Years Ended December 31

 

2019

 

2018

 

2017

(In millions)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Gross medical claims payable, beginning of year

$

7,266

 

 

$

7,814

 

 

$

7,656

 

Ceded medical claims payable, beginning of year

(34

)

 

(105

)

 

(539

)

Net medical claims payable, beginning of year

7,232

 

 

7,709

 

 

7,117

 

 

 

 

 

 

 

Business combinations and purchase adjustments

 

 

199

 

 

76

 

 

 

 

 

 

 

Net incurred medical claims:

 

 

 

 

 

Current year

78,695

 

 

69,581

 

 

70,377

 

Prior years redundancies(1)

(500

)

 

(930

)

 

(1,133

)

Total net incurred medical claims

78,195

 

 

68,651

 

 

69,244

 

 

 

 

 

 

 

Net payments attributable to:

 

 

 

 

 

Current year medical claims

70,294

 

 

62,748

 

 

62,923

 

Prior years medical claims

6,518

 

 

6,579

 

 

5,805

 

Total net payments

76,812

 

 

69,327

 

 

68,728

 

 

 

 

 

 

 

Net medical claims payable, end of year

8,615

 

 

7,232

 

 

7,709

 

Ceded medical claims payable, end of year

33

 

 

34

 

 

105

 

Gross medical claims payable, end of year*

$

8,648

 

 

$

7,266

 

 

$

7,814

 

 

 

 

 

 

 

Current year medical claims paid as a percentage of current year net incurred medical claims

89.3

%

 

90.2

%

 

89.4

%

 

 

 

 

 

 

Prior year redundancies in the current year as a percentage of prior year net medical claims payable less prior year redundancies in the current year

7.4

%

 

13.7

%

 

18.9

%

 

 

 

 

 

 

Prior year redundancies in the current year as a percentage of prior year net incurred medical claims

0.7

%

 

1.3

%

 

1.8

%

 

 

 

 

 

 

(1) Negative amounts reported for net incurred medical claims related to prior years result from claims being settled for
amounts less than originally estimated.

* Excludes insurance lines other than short duration.

 

 

 

 

 

Anthem, Inc.
GAAP Reconciliation

(Unaudited)

Anthem, Inc. has referenced “Adjusted Net Income” and “Adjusted Net Income Per Share,” which are non-GAAP measures, in this document. These non-GAAP measures are not intended to be alternatives to any measure calculated in accordance with GAAP. In addition to these non-GAAP measures, references are made to the measures “Operating Revenue” and “Operating Gain.” Each of these measures is provided to further aid investors in understanding and analyzing the company’s core operating results and comparing Anthem, Inc.’s financial results. A reconciliation of Operating Revenue to Total Revenue is set forth in the Consolidated Statements of Income herein. A reconciliation of the non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP, together with a reconciliation of reportable segments operating gain to income before income tax expense, is reported below.

 

Three Months Ended
December 31

 

 

 

Twelve Months Ended
December 31

 

 

(In millions, except per share data)

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Net income

$

934

 

 

$

424

 

 

120.3

%

 

$

4,807

 

 

$

3,750

 

 

28.2

%

Add / (Subtract):

 

 

 

 

 

 

 

 

 

 

 

Net realized (gains) losses on financial instruments

(24

)

 

185

 

 

 

 

(114

)

 

180

 

 

 

Amortization of other intangible assets

82

 

 

94

 

 

 

 

338

 

 

358

 

 

 

Other-than-temporary impairment losses recognized in income

17

 

 

8

 

 

 

 

47

 

 

26

 

 

 

Loss (gain) on extinguishment of debt

3

 

 

(6

)

 

 

 

2

 

 

11

 

 

 

Transaction and integration related costs

3

 

 

 

 

 

 

11

 

 

9

 

 

 

Litigation expenses

8

 

 

 

 

 

 

52

 

 

 

 

 

Tax impact of non-GAAP adjustments

(23

)

 

(61

)

 

 

 

(84

)

 

(135

)

 

 

Net adjustment items

66

 

 

220

 

 

 

 

252

 

 

449

 

 

 

Adjusted net income

$

1,000

 

 

$

644

 

 

55.3

%

 

$

5,059

 

 

$

4,199

 

 

20.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

$

3.62

 

 

$

1.61

 

 

124.8

%

 

$

18.47

 

 

$

14.19

 

 

30.2

%

Add / (Subtract):

 

 

 

 

 

 

 

 

 

 

 

Net realized (gains) losses on financial instruments

(0.09

)

 

0.70

 

 

 

 

(0.44

)

 

0.68

 

 

 

Amortization of other intangible assets

0.32

 

 

0.36

 

 

 

 

1.30

 

 

1.36

 

 

 

Other-than-temporary impairment losses recognized in income

0.07

 

 

0.03

 

 

 

 

0.18

 

 

0.10

 

 

 

Loss (gain) on extinguishment of debt

0.01

 

 

(0.02

)

 

 

 

0.01

 

 

0.04

 

 

 

Transaction and integration related costs

0.01

 

 

 

 

 

 

0.04

 

 

0.03

 

 

 

Litigation expenses

0.03

 

 

 

 

 

 

0.20

 

 

 

 

 

Tax impact of non-GAAP adjustments

(0.09

)

 

(0.23

)

 

 

 

(0.32

)

 

(0.51

)

 

 

Rounding impact

 

 

(0.01

)

 

 

 

 

 

 

 

 

Net adjustment items

0.26

 

 

0.83

 

 

 

 

0.97

 

 

1.70

 

 

 

Adjusted net income per diluted share

$

3.88

 

 

$

2.44

 

 

59.0

%

 

$

19.44

 

 

$

15.89

 

 

22.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2020 Outlook

 

 

 

 

 

 

 

 

Net income per diluted share

Greater than $21.44

 

 

 

 

 

 

 

 

Add / (Subtract):

 

 

 

 

 

 

 

 

 

Amortization of other intangible assets

Approximately $1.13

 

 

 

 

 

 

 

 

Tax impact of non-GAAP adjustments

Approximately ($0.27)

 

 

 

 

 

 

 

 

Net adjustment items

Approximately $0.86

 

 

 

 

 

 

 

 

Adjusted net income per diluted share

Greater than $22.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
December 31

 

 

 

Twelve Months Ended
December 31

 

 

(In millions)

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Reportable segments operating gain

$

1,098

 

 

$

750

 

 

46.4

%

 

$

5,999

 

 

$

5,426

 

 

10.6

%

Net investment income

268

 

 

262

 

 

 

 

1,005

 

 

970

 

 

 

Net realized gains/(losses) on financial instruments

24

 

 

(185

)

 

 

 

114

 

 

(180

)

 

 

Other-than-temporary impairment losses recognized in income

(17

)

 

(8

)

 

 

 

(47

)

 

(26

)

 

 

Interest expense

(190

)

 

(189

)

 

 

 

(746

)

 

(753

)

 

 

Amortization of other intangible assets

(82

)

 

(94

)

 

 

 

(338

)

 

(358

)

 

 

Gain/(loss) on extinguishment of debt

(3

)

 

6

 

 

 

 

(2

)

 

(11

)

 

 

Income before income tax expense

$

1,098

 

 

$

542

 

 

102.6

%

 

$

5,985

 

 

$

5,068

 

 

18.1

%

Anthem, Inc.

Financial Guidance Summary

(Unaudited)

 

 

 

 

 

 

 

 

 

Full Year 2019 Actual

 

Full Year 2020 Outlook

 

Approximate Change

Year-End Medical Enrollment

 

 

 

 

 

 

Self-funded

 

25,418

 

25,900 - 26,000

 

482k - 582k

Fully-Insured

 

15,582

 

16,000 - 16,300

 

418k - 718k

Total

 

41,000

 

41,900 - 42,300

 

900k - 1,300k

 

 

 

 

 

 

 

Operating Revenue

 

$103.1 billion

 

Approximately $117 billion

 

Approximately $13.9 billion

or 13.4%

 

 

 

 

 

 

 

Premium Revenue

 

$94.2 billion

 

$101 billion - $103 billion

 

$6.8 billion - $8.8 billion or 7.2% - 9.3%

 

 

 

 

 

 

 

Benefit Expense Ratio

 

86.8%

 

85.8% +/- 50 bps

 

(100 bps) +/- 50 bps

 

 

 

 

 

 

 

Cost of Products Sold

 

$2.0 billion

 

$6.9 billion - $7.3 billion

 

$4.9 billion - $5.3 billion

 

 

 

 

 

 

 

SG&A Expense Ratio

 

13.0%

 

12.8% +/- 30 bps

 

(20) bps +/- 30 bps

 

 

 

 

 

 

 

Operating Gain

 

$6.0 billion

 

Greater than $7.4 billion

 

Greater than $1.4 billion or 23.3%

 

 

 

 

 

 

 

Other Pre-Tax Items:

 

 

 

 

 

 

Net Investment income

 

$1.0 billion

 

$970 million

 

($30) million

Interest Expense

 

($746) million

 

($815) million

 

($69) million

Amortization of Intangible Assets

 

($338) million

 

($290) million

 

$48 million

Net Pre-Tax Expense

 

($84) million

 

($135) million

 

($51) million

 

 

 

 

 

 

 

Effective Tax Rate

 

19.7%

 

24.0% - 26.0%

 

4.3% - 6.3%

 

 

 

 

 

 

 

GAAP EPS

 

$18.47

 

Greater than $21.44

 

16.1% or better

 

 

 

 

 

 

 

Adjusted EPS

 

$19.44

 

Greater than $22.30

 

14.7% or better

 

 

 

 

 

 

 

Diluted Shares

 

260.3 million

 

255 - 257 million

 

(2.0%) - (1.3%)

 

 

 

 

 

 

 

Operating Cash Flow

 

$6.1 billion

 

Greater than $6.4 billion

 

Greater than $0.3 billion

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our views about future events and financial performance and are generally not historical facts. Words such as “expect,” “feel,” “believe,” “will,” “may,” “should,” “anticipate,” “intend,” “estimate,” “project,” “forecast,” “plan” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to: financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. You are also urged to carefully review and consider the various risks and other disclosures discussed in our reports filed with the U.S. Securities and Exchange Commission from time to time, which attempt to advise interested parties of the factors that affect our business. Except to the extent otherwise required by federal securities laws, we do not undertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof. These risks and uncertainties include, but are not limited to: trends in healthcare costs and utilization rates; our ability to secure sufficient premium rates, including regulatory approval for and implementation of such rates; the impact of federal and state regulation, including ongoing changes in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended, or collectively, the ACA, and the ultimate outcome of legal challenges to the ACA; our ability to contract with providers on cost-effective and competitive terms; competitive pressures and our ability to adapt to changes in the industry and develop and implement strategic growth opportunities; reduced enrollment; unauthorized disclosure of member or employee sensitive or confidential information, including the impact and outcome of any investigations, inquiries, claims and litigation related thereto; risks and uncertainties regarding Medicare and Medicaid programs, including those related to non-compliance with the complex regulations imposed thereon; our ability to maintain and achieve improvement in Centers for Medicare and Medicaid Services, or CMS, Star ratings and other quality scores and funding risks with respect to revenue received from participation therein; a negative change in our healthcare product mix; costs and other liabilities associated with litigation, government investigations, audits or reviews; the ultimate outcome of litigation between Cigna Corporation, or Cigna, and us related to the merger agreement between the parties and the potential for such litigation to cause us to incur substantial additional costs, including potential settlement and judgment costs; risks and uncertainties related to our pharmacy benefit management, or PBM, business, including non-compliance by any party with the PBM services agreements between us and each of Express Scripts, Inc., or Express Scripts, and CaremarkPCS Health, L.L.C., or CVS Health, as well as agreements governing the transition of pharmacy benefit management services provided to us from Express Scripts to CVS Health Corporation; medical malpractice or professional liability claims or other risks related to healthcare services and PBM provided by our subsidiaries; general risks associated with mergers, acquisitions, joint ventures and strategic alliances; possible impairment of the value of our intangible assets if future results do not adequately support goodwill and other intangible assets; possible restrictions in the payment of dividends from our subsidiaries and increases in required minimum levels of capital; our ability to repurchase shares of our common stock and pay dividends on our common stock due to the adequacy of our cash flow and earnings and other considerations; the potential negative effect from our substantial amount of outstanding indebtedness; a downgrade in our financial strength ratings; the effects of any negative publicity related to the health benefits industry in general or us in particular; failure to effectively maintain and modernize our information systems; events that may negatively affect our licenses with the Blue Cross and Blue Shield Association; large scale medical emergencies, such as future public health epidemics and catastrophes; changes in economic and market conditions, as well as regulations that may negatively affect our liquidity and investment portfolios; changes in U.S. tax laws; intense competition to attract and retain employees; and, various laws and provisions in our governing documents that may prevent or discourage takeovers and business combinations.

Source: Anthem, Inc.

Anthem Contacts:
Investor Relations
Chris Rigg
Chris.Rigg@anthem.com

Media
Jill Becher, 414-234-1573
Jill.Becher@anthem.com