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Anthem Reports Second Quarter 2019 Results, Raises Full Year Outlook
  • Second quarter net income was $4.36 per share, including net negative adjustment items of $0.28 per share. Adjusted net income was $4.64* per share.
  • Operating revenue grew 10.8% over the prior year quarter to $25.2 billion.
  • Medical enrollment was 40.9 million members, representing an increase of 1.3 million members over the prior year quarter, driven by growth in the fully insured businesses.
  • The Company now expects the earnings contribution from IngenioRx to achieve the upper end of the $0.70 - $0.90 range. As a result, full year net income is now expected to be greater than $18.34 per share and full year adjusted net income is now expected to be greater than $19.30* per share.
  • Third quarter 2019 dividend of $0.80 per share declared to shareholders.

 

INDIANAPOLIS--(BUSINESS WIRE)--Jul. 24, 2019-- Anthem, Inc. (NYSE: ANTM) reported second quarter financial results driven by strong revenue growth and steady progress on the implementation of IngenioRx.

"Our second quarter results reflect solid top line growth across our businesses and reinforce our commitment to innovation and performance execution,” said Gail K. Boudreaux, President and CEO. “We began successfully migrating members to IngenioRx on May 1 and have received transition approvals from all of our 14 Blue states and the majority of our Medicaid states. We are tracking ahead of expectations, and as a result, we now expect IngenioRx to achieve the upper end of our $0.70 - $0.90 guidance.”

“Contributing to the momentum of IngenioRx, we are pleased to announce our first external pharmacy contract win with Blue Cross of Idaho beginning January 1, 2020, further demonstrating the strength of our pharmacy offering and our ability to deliver more affordable care with a simplified consumer experience. I am excited about our future growth opportunities as we continue to leverage our growing suite of integrated solutions, including our recently announced acquisition of Beacon Health Options, to create greater value for the customers, members and care providers that we are privileged to serve.”

* Refer to the GAAP reconciliation tables.

CONSOLIDATED HIGHLIGHTS

Membership: Medical enrollment totaled approximately 40.9 million members at June 30, 2019, an increase of 1.3 million, or 3.3 percent, from June 30, 2018. Total fully insured enrollment grew by 1.1 million, or 7.7 percent, and self-funded enrollment increased by 188 thousand, or 0.7 percent. Government Business enrollment increased by 1.0 million, driven by growth in Medicaid and Medicare. Commercial & Specialty Business enrollment increased by 290 thousand, driven by growth in all lines of business.

Medical enrollment increased 9 thousand sequentially, reflecting growth in Medicaid and Medicare, partially offset by declines in Commercial & Specialty Business enrollment.

Operating Revenue: Operating revenue was $25.2 billion in the second quarter of 2019, an increase of $2.5 billion, or 10.8 percent, versus $22.7 billion in the prior year quarter. The increase in operating revenue reflected membership growth across our businesses and premium rate increases to cover overall cost trends. The increase was partially offset by the one year waiver of the health insurance tax in 2019.

Benefit Expense Ratio:The benefit expense ratio was 86.7 percent in the second quarter of 2019, an increase of 330 basis points from 83.4 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 and medical cost experience in the Medicaid business.

Medical claims reserves established at December 31, 2018 developed moderately better than the Company’s expectation during the first six months of 2019.

Medical Cost Trend:For the full year 2019, the Company continues to expect underlying Local Group medical cost trend will be in the range of 6.0% +/- 50 basis points.

Days in Claims Payable:Days in Claims Payable was 39.1 days as of June 30, 2019, an increase of 0.6 days from 38.5 days as of March 31, 2019.

SG&A Expense Ratio: The SG&A expense ratio was 13.0 percent in the second quarter of 2019, a decrease of 210 basis points from 15.1 percent in the second quarter of 2018. The decrease, as expected, was primarily driven by the one year waiver of the health insurance tax in 2019 and growth in operating revenue.

Operating Cash Flow: Operating cash flow was $1.4 billion, or 1.3 times net income, and an increase of $895 million compared to the second quarter of 2018. Operating cash flow was $3.1 billion, or 1.1 times net income for the six months ending June 30, 2019.

Share Repurchase Program: During the second quarter of 2019, the Company repurchased 1.7 million shares of its common stock for $458 million, or a weighted average price of $272.95. As of June 30, 2019, the Company had approximately $4.7 billion of Board-approved share repurchase authorization remaining.

Cash Dividend: During the second quarter of 2019, the Company paid a quarterly dividend of $0.80 per share, representing a distribution of cash totaling $206 million.

On July 23, 2019, the Audit Committee declared a third quarter 2019 dividend to shareholders of $0.80 per share. On an annualized basis, this equates to a dividend of $3.20 per share. The third quarter dividend is payable on September 25, 2019 to shareholders of record at the close of business on September 10, 2019.

Investment Portfolio & Capital Position: During the second quarter of 2019, the Company recorded net realized gains on financial instruments totaling $11 million and other-than-temporary impairment losses totaling $7 million. During the second quarter of 2018, the Company recorded net realized gains of $4 million and other-than-temporary impairment losses totaling $4 million.

As of June 30, 2019, the Company’s net unrealized gain position in the investment portfolio was $561 million, consisting of fixed maturity securities. As of June 30, 2019 cash and investments at the parent company totaled approximately $1.4 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 June 30

 

Six Months Ended June 30

 

 

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

 

 

Operating Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

$9,417

 

 

$9,055

 

 

4.0

%

 

$18,809

 

 

$18,006

 

 

4.5

%

 

 

Government Business

15,538

 

 

13,619

 

 

14.1

%

 

30,464

 

 

26,972

 

 

12.9

%

 

 

Other

794

 

 

350

 

 

126.9

%

 

1,342

 

 

710

 

 

89.0

%

 

 

Eliminations

(572

)

 

(309

)

 

NM2

 

(1,050

)

 

(631

)

 

NM2

 

 

Total Operating Revenue1

$25,177

 

$22,715

 

10.8

%

 

$49,565

 

$45,057

 

10.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Gain / (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

$983

 

 

$1,048

 

 

(6.2

)%

 

$2,581

 

 

$2,450

 

 

5.3

%

 

 

Government Business

478

 

 

532

 

 

(10.2

)%

 

855

 

 

1,021

 

 

(16.3

)%

 

 

Other

(28

)

 

(21

)

 

NM2

 

(63

)

 

(44

)

 

NM2

 

 

Total Operating Gain1

$1,433

 

$1,559

 

(8.1

)%

 

$3,373

 

 

$3,427

 

 

(1.6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

10.4

%

 

11.6

%

 

(120) bp

 

13.7

%

 

13.6

%

 

10 bp

 

 

Government Business

3.1

%

 

3.9

%

 

(80) bp

 

2.8

%

 

3.8

%

 

(100) bp

 

 

Total Operating Margin1

5.7

%

 

6.9

%

 

(120) bp

 

6.8

%

 

7.6

%

 

(80) bp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See “Basis of Presentation.”

(2)"NM" = calculation not meaningful.

Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled $983 million in the second quarter of 2019, a decrease of $65 million, or 6.2 percent, from $1,048 million in the second quarter of 2018. The decrease is primarily driven by the impact of higher favorable risk adjustor adjustments recognized in 2018. The decline is partially offset by higher administrative fee revenue in our self-funded businesses, driven by greater penetration of value-added services.

Government Business: Operating gain in the Government Business segment was $478 million in the second quarter of 2019, a decrease of $54 million, or 10.2 percent, from $532 million in the second quarter of 2018. The decrease is driven by continued elevated medical cost experience in Medicaid in select states and the one year waiver of the health insurance tax in 2019, partially offset by out of period revenue adjustments and Medicare membership growth.

Other: The Company reported an operating loss of $28 million in the Other segment for the second quarter of 2019, compared with an operating loss of $21 million in the prior year quarter.

OUTLOOK

Full Year 2019:

  • GAAP net income is now expected to be greater than $18.34 per share, including approximately $0.96 per share of net unfavorable items. Excluding these items, adjusted net income is now expected to be greater than $19.30* per share.
  • Medical membership is now expected to be in the range of 41,000,000 - 41,300,000. Fully-insured membership is expected to be in the range of 15,600,000 - 15,800,000 and self-funded membership is expected to be in the range of 25,400,000 - 25,500,000.
  • Operating revenue is now expected to be approximately $102.0 billion, including premium revenue of $93.0 billion - $94.0 billion.
  • Benefit expense ratio is now expected to be in the range of 86.2% - 86.5%.
  • SG&A ratio is now expected to be in the range of 13.2% - 13.5%.
  • Cost of products sold is expected to be $1.6 billion - $1.8 billion.
  • Operating cash flow is expected to be greater than $5.2 billion.

* 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 Daylight Time (“EDT”) to discuss the company’s second 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:

800-553-0358 (Domestic)

       

800-475-6701 (Domestic Replay)

612-332-0632 (International)

       

320-365-3844 (International Replay)

An access code is not required for today’s conference call. The access code for the replay is 432045. The replay will be available from 11:00 a.m. EDT today, until the end of the day on August 7, 2019. 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 78 million people, including over 40 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

June 30,
2019

 

June 30,
2018

 

March 31,
2019

 

June 30,
2018

 

March 31,
2019

Customer Type

 

 

 

 

 

 

 

 

 

Local Group

15,670

 

 

15,634

 

 

15,697

 

 

0.2

%

 

(0.2

)%

Individual

741

 

 

712

 

 

773

 

 

4.1

%

 

(4.1

)%

 

 

 

 

 

 

 

 

 

 

National:

 

 

 

 

 

 

 

 

 

National Accounts

7,693

 

 

7,658

 

 

7,757

 

 

0.5

%

 

(0.8

)%

BlueCard®

6,009

 

 

5,819

 

 

5,981

 

 

3.3

%

 

0.5

%

Total National

13,702

 

 

13,477

 

 

13,738

 

 

1.7

%

 

(0.3

)%

 

 

 

 

 

 

 

 

 

 

Medicare:

 

 

 

 

 

 

 

 

 

Medicare Advantage

1,170

 

 

937

 

 

1,144

 

 

24.9

%

 

2.3

%

Medicare Supplement

877

 

 

827

 

 

867

 

 

6.0

%

 

1.2

%

Total Medicare

2,047

 

 

1,764

 

 

2,011

 

 

16.0

%

 

1.8

%

 

 

 

 

 

 

 

 

 

 

Medicaid

7,099

 

 

6,414

 

 

7,033

 

 

10.7

%

 

0.9

%

Federal Health Products & Services

1,593

 

 

1,560

 

 

1,591

 

 

2.1

%

 

0.1

%

Total Medical Membership

40,852

 

 

39,561

 

 

40,843

 

 

3.3

%

 

—%

Funding Arrangement

 

 

 

 

 

 

 

 

 

Self-Funded

25,433

 

 

25,245

 

 

25,495

 

 

0.7

%

 

(0.2

)%

Fully-Insured

15,419

 

 

14,316

 

 

15,348

 

 

7.7

%

 

0.5

%

Total Medical Membership

40,852

 

 

39,561

 

 

40,843

 

 

3.3

%

 

—%

Reportable Segment

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

30,113

 

 

29,823

 

 

30,208

 

 

1.0

%

 

(0.3

)%

Government Business

10,739

 

 

9,738

 

 

10,635

 

 

10.3

%

 

1.0

%

Total Medical Membership

40,852

 

 

39,561

 

 

40,843

 

 

3.3

%

 

—%

Other Membership

 

 

 

 

 

 

 

 

 

Life and Disability Members

4,906

 

 

4,673

 

 

4,849

 

 

5.0

%

 

1.2

%

Dental Members

5,931

 

 

5,788

 

 

5,955

 

 

2.5

%

 

(0.4

)%

Dental Administration Members

5,523

 

 

5,384

 

 

5,491

 

 

2.6

%

 

0.6

%

Vision Members

7,161

 

 

6,760

 

 

7,169

 

 

5.9

%

 

(0.1

)%

Medicare Part D Standalone Members

287

 

 

312

 

 

289

 

 

(8.0

)%

 

(0.7

)%

Anthem, Inc.

Consolidated Statements of Income

(Unaudited)

 

 

 

 

 

 

 

(In millions, except per share data)

 

Three Months Ended
June 30

 

 

 

 

2019

 

2018

 

Change

Revenues

 

 

 

 

 

 

Premiums

 

$

23,501

 

 

$

21,248

 

 

10.6

%

Administrative fees and other revenue

 

1,676

 

 

1,467

 

 

14.2

%

Total operating revenue

 

25,177

 

 

22,715

 

 

10.8

%

Net investment income

 

285

 

 

229

 

 

24.5

%

Net realized gains on financial instruments

 

11

 

 

4

 

 

175.0

%

Other-than-temporary impairment losses on investments:

 

 

 

 

 

 

Total other-than-temporary impairment losses on investments

 

(9

)

 

(4

)

 

NM

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

 

2

 

 

 

 

NM

Other-than-temporary impairment losses recognized in income

 

(7

)

 

(4

)

 

NM

 

 

 

 

 

 

 

Total revenues

 

25,466

 

 

22,944

 

 

11.0

%

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

Benefit expense

 

20,368

 

 

17,728

 

 

14.9

%

Cost of products sold

 

98

 

 

 

 

NM

Selling, general and administrative expense

 

3,278

 

 

3,428

 

 

(4.4

)%

Interest expense

 

184

 

 

192

 

 

(4.2

)%

Amortization of other intangible assets

 

85

 

 

93

 

 

(8.6

)%

Gain on extinguishment of debt

 

 

 

(1

)

 

NM

 

 

 

 

 

 

 

Total expenses

 

24,013

 

 

21,440

 

 

12.0

%

 

 

 

 

 

 

 

Income before income tax expense

 

1,453

 

 

1,504

 

 

(3.4

)%

 

 

 

 

 

 

 

Income tax expense

 

314

 

 

450

 

 

(30.2

)%

 

 

 

 

 

 

 

Net income

 

$

1,139

 

 

$

1,054

 

 

8.1

%

 

 

 

 

 

 

 

Net income per diluted share

 

$

4.36

 

 

$

3.98

 

 

9.5

%

 

 

 

 

 

 

 

Diluted shares

 

261.0

 

 

264.5

 

 

(1.3

)%

 

 

 

 

 

 

 

Benefit expense as a percentage of premiums

 

86.7

%

 

83.4

%

 

330bp

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

 

13.0

%

 

15.1

%

 

(210)bp

Income before income taxes as a percentage of total revenue

 

5.7

%

 

6.6

%

 

(90)bp

                 

"NM" = calculation not meaningful

Anthem, Inc.

Consolidated Statements of Income

(Unaudited)

 

 

 

 

 

 

 

(In millions, except per share data)

 

Six Months Ended
June 30

 

 

 

 

2019

 

2018

 

Change

Revenues

 

 

 

 

 

 

Premiums

 

$

46,344

 

 

$

42,151

 

 

9.9

%

Administrative fees and other revenue

 

3,221

 

 

2,906

 

 

10.8

%

Total operating revenue

 

49,565

 

 

45,057

 

 

10.0

%

Net investment income

 

495

 

 

458

 

 

8.1

%

Net realized gains (losses) on financial instruments

 

89

 

 

(22

)

 

NM

Other-than-temporary impairment losses on investments:

 

 

 

 

 

 

Total other-than-temporary impairment losses on investments

 

(22

)

 

(12

)

 

NM

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

 

5

 

 

 

 

NM

Other-than-temporary impairment losses recognized in income

 

(17

)

 

(12

)

 

NM

 

 

 

 

 

 

 

Total revenues

 

50,132

 

 

45,481

 

 

10.2

%

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

Benefit expense

 

39,650

 

 

34,774

 

 

14.0

%

Cost of products sold

 

98

 

 

 

 

NM

Selling, general and administrative expense

 

6,444

 

 

6,856

 

 

(6.0

)%

Interest expense

 

371

 

 

376

 

 

(1.3

)%

Amortization of other intangible assets

 

172

 

 

173

 

 

(0.6

)%

(Gain) loss on extinguishment of debt

 

(1

)

 

18

 

 

(105.6

)%

 

 

 

 

 

 

 

Total expenses

 

46,734

 

 

42,197

 

 

10.8

%

 

 

 

 

 

 

 

Income before income tax expense

 

3,398

 

 

3,284

 

 

3.5

%

 

 

 

 

 

 

 

Income tax expense

 

708

 

 

918

 

 

(22.9

)%

 

 

 

 

 

 

 

Net income

 

$

2,690

 

 

$

2,366

 

 

13.7

%

 

 

 

 

 

 

 

Net income per diluted share

 

$

10.28

 

 

$

8.97

 

 

14.6

%

 

 

 

 

 

 

 

Diluted shares

 

261.6

 

 

263.7

 

 

(0.8

)%

 

 

 

 

 

 

 

Benefit expense as a percentage of premiums

 

85.6

%

 

82.5

%

 

310bp

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

 

13.0

%

 

15.2

%

 

(220)bp

Income before income taxes as a percentage of total revenue

 

6.8

%

 

7.2

%

 

(40)bp

                 

"NM" = calculation not meaningful

Anthem, Inc.

Consolidated Balance Sheets

 

(In millions)

June 30,
2019

 

December 31,
2018

Assets

(Unaudited)

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

4,078

 

 

$

3,934

 

Fixed maturity securities, current

19,123

 

 

16,692

 

Equity securities, current

1,492

 

 

1,493

 

Other invested assets, current

14

 

 

21

 

Accrued investment income

168

 

 

162

 

Premium receivables

4,751

 

 

4,465

 

Self-funded receivables

2,534

 

 

2,278

 

Other receivables

2,633

 

 

2,558

 

Income taxes receivable

296

 

 

10

 

Securities lending collateral

565

 

 

604

 

Other current assets

2,151

 

 

2,104

 

Total current assets

37,805

 

 

34,321

 

 

 

 

 

Long-term investments:

 

 

 

Fixed maturity securities

509

 

 

487

 

Equity securities

33

 

 

33

 

Other invested assets

3,719

 

 

3,726

 

Property and equipment, net

2,837

 

 

2,735

 

Goodwill

20,500

 

 

20,504

 

Other intangible assets

8,840

 

 

9,007

 

Other noncurrent assets

1,608

 

 

758

 

Total assets

$

75,851

 

 

$

71,571

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

Liabilities

 

 

 

Current liabilities:

 

 

 

Policy liabilities:

 

 

 

Medical claims payable

$

8,758

 

 

$

7,454

 

Reserves for future policy benefits

77

 

 

75

 

Other policyholder liabilities

2,586

 

 

2,590

 

Total policy liabilities

11,421

 

 

10,119

 

Unearned income

900

 

 

902

 

Accounts payable and accrued expenses

4,028

 

 

4,959

 

Security trades pending payable

382

 

 

197

 

Securities lending payable

564

 

 

604

 

Short-term borrowings

1,010

 

 

1,145

 

Current portion of long-term debt

850

 

 

849

 

Other current liabilities

3,935

 

 

3,190

 

Total current liabilities

23,090

 

 

21,965

 

 

 

 

 

Long-term debt, less current portion

17,436

 

 

17,217

 

Reserves for future policy benefits, noncurrent

655

 

 

706

 

Deferred tax liabilities, net

2,211

 

 

1,960

 

Other noncurrent liabilities

1,666

 

 

1,182

 

Total liabilities

45,058

 

 

43,030

 

 

 

 

 

Shareholders’ equity

 

 

 

Common stock

3

 

 

3

 

Additional paid-in capital

9,494

 

 

9,536

 

Retained earnings

21,679

 

 

19,988

 

Accumulated other comprehensive loss

(383

)

 

(986

)

Total shareholders’ equity

30,793

 

 

28,541

 

Total liabilities and shareholders’ equity

$

75,851

 

 

$

71,571

 

Anthem, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 

 

 

(In millions)

Six Months Ended June 30

 

2019

 

2018

Operating activities

 

 

 

 

 

Net income

$2,690

 

 

$2,366

 

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

 

 

 

 

 

Net realized (gains) losses on financial instruments

(89

)

 

22

 

Other-than-temporary impairment losses recognized in income

17

 

 

12

 

(Gain) loss on extinguishment of debt

(1

)

 

18

 

Deferred income taxes

79

 

 

2

 

Amortization, net of accretion

515

 

 

495

 

Depreciation expense

71

 

 

61

 

Share-based compensation

140

 

 

78

 

Changes in operating assets and liabilities:

 

 

 

 

 

Receivables, net

(589

)

 

(570

)

Other invested assets

(28

)

 

(11

)

Other assets

(258

)

 

(445

)

Policy liabilities

1,251

 

 

(610

)

Unearned income

(2

)

 

1,158

 

Accounts payable and accrued expenses

(1,015

)

 

29

 

Other liabilities

632

 

 

70

 

Income taxes

(286

)

 

187

 

Other, net

(60

)

 

(105

)

Net cash provided by operating activities

3,067

 

 

2,757

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of fixed maturity securities

(5,023

)

 

(4,886

)

Proceeds from sales and maturities of fixed maturity securities

3,454

 

 

4,882

 

Purchases of equity securities

(5,974

)

 

(658

)

Proceeds from sales of equity securities

6,059

 

 

1,777

 

Purchases of other invested assets

(116

)

 

(247

)

Proceeds from sales of other invested assets

216

 

 

198

 

Changes in securities lending collateral

40

 

 

(170

)

Purchases of subsidiaries, net of cash acquired

 

 

(1,722

)

Net purchases of property and equipment

(455

)

 

(533

)

Other, net

(18

)

 

15

 

Net cash used in investing activities

(1,817

)

 

(1,344

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Net proceeds from (repayments of) commercial paper borrowings

203

 

 

(704

)

Net repayments of short-term borrowings

(135

)

 

(155

)

Net (repayments of) proceeds from long-term borrowings

(73

)

 

172

 

Changes in securities lending payable

(40

)

 

170

 

Changes in bank overdrafts

84

 

 

69

 

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

(752

)

 

(795

)

Change in collateral and settlements of debt-related derivatives

 

 

22

 

Cash dividends

(412

)

 

(388

)

Proceeds from issuance of common stock under employee stock plans

100

 

 

95

 

Taxes paid through withholding of common stock under employee stock plans

(80

)

 

(76

)

Net cash used in financing activities

(1,106

)

 

(340

)

 

 

 

 

 

 

Change in cash and cash equivalents

144

 

 

1,073

 

Cash and cash equivalents at beginning of year

3,934

 

 

3,609

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

$4,078

 

 

$4,682

 

Anthem, Inc.

Reconciliation of Medical Claims Payable

 

 

Six Months Ended
June 30

 

Years Ended December 31

 

2019

 

2018

 

2018

 

2017

 

2016

(In millions)

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross medical claims payable, beginning of period

$

7,266

 

 

$

7,814

 

 

$

7,814

 

 

$

7,656

 

 

$

7,360

 

Ceded medical claims payable, beginning of period

(34

)

 

(105

)

 

(105

)

 

(539

)

 

(646

)

Net medical claims payable, beginning of period

7,232

 

 

7,709

 

 

7,709

 

 

7,117

 

 

6,714

 

 

 

 

 

 

 

 

 

 

 

Business combinations and purchase adjustments

 

 

199

 

 

199

 

 

76

 

 

 

 

 

 

 

 

 

 

 

 

 

Net incurred medical claims:

 

 

 

 

 

 

 

 

 

Current year

38,237

 

 

33,922

 

 

69,581

 

 

70,377

 

 

64,868

 

Prior years redundancies(1)

(414

)

 

(795

)

 

(930

)

 

(1,133

)

 

(835

)

Total net incurred medical claims

37,823

 

 

33,127

 

 

68,651

 

 

69,244

 

 

64,033

 

 

 

 

 

 

 

 

 

 

 

Net payments attributable to:

 

 

 

 

 

 

 

 

 

Current year medical claims

30,367

 

 

27,502

 

 

62,748

 

 

62,923

 

 

57,879

 

Prior years medical claims

6,182

 

 

6,208

 

 

6,579

 

 

5,805

 

 

5,751

 

Total net payments

36,549

 

 

33,710

 

 

69,327

 

 

68,728

 

 

63,630

 

 

 

 

 

 

 

 

 

 

 

Net medical claims payable, end of period

8,506

 

 

7,325

 

 

7,232

 

 

7,709

 

 

7,117

 

Ceded medical claims payable, end of period

43

 

 

35

 

 

34

 

 

105

 

 

539

 

Gross medical claims payable, end of period

$

8,549

 

 

$

7,360

 

 

$

7,266

 

 

$

7,814

 

 

$

7,656

 

 

 

 

 

 

 

 

 

 

 

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

79.4

%

 

81.1

%

 

90.2

%

 

89.4

%

 

89.2

%

 

 

 

 

 

 

 

 

 

 

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

6.1

%

 

11.5

%

 

13.7

%

 

18.9

%

 

14.2

%

 

 

 

 

 

 

 

 

 

 

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

0.6

%

 

1.2

%

 

1.3

%

 

1.8

%

 

1.4

%

 

 

 

 

 

 

 

 

 

 

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

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. Prior amounts may be rounded differently to conform to current presentation.

 

Three Months Ended
June 30

 

 

 

Six Months Ended
June 30

 

 

(In millions, except per share data)

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Net income

$

1,139

 

 

$

1,054

 

 

8.1

%

 

$

2,690

 

 

$

2,366

 

 

13.7

%

Add / (Subtract):

 

 

 

 

 

 

 

 

 

 

 

Net realized (gains) losses on financial instruments

(11

)

 

(4

)

 

 

 

(89

)

 

22

 

 

 

Amortization of other intangible assets

85

 

 

93

 

 

 

 

172

 

 

173

 

 

 

Other-than-temporary impairment losses recognized in income

7

 

 

4

 

 

 

 

17

 

 

12

 

 

 

(Gain) loss on extinguishment of debt

 

 

(1

)

 

 

 

(1

)

 

18

 

 

 

Litigation expenses for CI and ESI

9

 

 

 

 

 

 

35

 

 

 

 

 

Transaction related costs

5

 

 

 

 

 

 

5

 

 

9

 

 

 

Tax impact of non-GAAP adjustments

(23

)

 

(21

)

 

 

 

(37

)

 

(55

)

 

 

Net adjustment items

72

 

 

71

 

 

 

 

102

 

 

179

 

 

 

Adjusted net income

$

1,211

 

 

$

1,125

 

 

7.6

%

 

$

2,792

 

 

$

2,545

 

 

9.7

%

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

$

4.36

 

 

$

3.98

 

 

9.5

%

 

$

10.28

 

 

$

8.97

 

 

14.6

%

Add / (Subtract):

 

 

 

 

 

 

 

 

 

 

 

Net realized (gains) losses on financial instruments

(0.04

)

 

(0.02

)

 

 

 

(0.34

)

 

0.08

 

 

 

Amortization of other intangible assets

0.33

 

 

0.35

 

 

 

 

0.66

 

 

0.66

 

 

 

Other-than-temporary impairment losses recognized in income

0.03

 

 

0.02

 

 

 

 

0.06

 

 

0.05

 

 

 

(Gain) loss on extinguishment of debt

 

 

 

 

 

 

 

 

0.07

 

 

 

Litigation expenses for CI and ESI

0.03

 

 

 

 

 

 

0.13

 

 

 

 

 

Transaction related costs

0.02

 

 

 

 

 

 

0.02

 

 

0.03

 

 

 

Tax impact of non-GAAP adjustments

(0.09

)

 

(0.09

)

 

 

 

(0.14

)

 

(0.21

)

 

 

Rounding Impact

 

 

0.01

 

 

 

 

 

 

 

 

 

Net adjustment items

0.28

 

 

0.27

 

 

 

 

0.39

 

 

0.68

 

 

 

Adjusted net income per diluted share

$

4.64

 

 

$

4.25

 

 

9.2

%

 

$

10.67

 

 

$

9.65

 

 

10.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2019 Outlook

 

 

 

 

 

 

 

 

Net income per diluted share

Greater than $18.34

 

 

 

 

 

 

 

 

Add / (Subtract):

 

 

 

 

 

 

 

 

 

Net realized gains on financial instruments

(0.34

)

 

 

 

 

 

 

 

 

Other-than-temporary impairment losses recognized in income

0.06

 

 

 

 

 

 

 

 

 

Litigation expenses for CI and ESI

0.13

 

 

 

 

 

 

 

 

 

Transaction related costs

0.02

 

 

 

 

 

 

 

 

 

Amortization of other intangible assets

Approximately $1.37

 

 

 

 

 

 

 

 

Tax impact of non-GAAP adjustments

Approximately ($0.28)

 

 

 

 

 

 

 

 

Net adjustment items

Approximately $0.96

 

 

 

 

 

 

 

 

Adjusted net income per diluted share

Greater than $19.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30

 

 

 

Six Months Ended
June 30

 

 

(In millions)

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Reportable segments operating gain

$

1,433

 

 

$

1,559

 

 

(8.1

)%

 

$

3,373

 

 

$

3,427

 

 

(1.6

)%

Net investment income

285

 

 

229

 

 

 

 

495

 

 

458

 

 

 

Net realized gains (losses) on financial instruments

11

 

 

4

 

 

 

 

89

 

 

(22

)

 

 

Other-than-temporary impairment losses recognized in income

(7

)

 

(4

)

 

 

 

(17

)

 

(12

)

 

 

Interest expense

(184

)

 

(192

)

 

 

 

(371

)

 

(376

)

 

 

Amortization of other intangible assets

(85

)

 

(93

)

 

 

 

(172

)

 

(173

)

 

 

Gain (loss) on extinguishment of debt

 

 

1

 

 

 

 

1

 

 

(18

)

 

 

Income before income tax expense

$

1,453

 

 

$

1,504

 

 

(3.4

)%

 

$

3,398

 

 

$

3,284

 

 

3.5

%

Anthem, Inc.

Reclassified Reportable Segment Highlights

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

Three Months Ended

 

 

March 31, 2018

 

 

June 30, 2018

 

 

September 30, 2018

 

 

December 31, 2018

 

 

Operating Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

$8,951

 

 

$9,055

 

 

$8,933

 

 

$8,843

 

 

Government Business

13,353

 

 

13,619

 

 

13,979

 

 

14,397

 

 

Other

360

 

 

350

 

 

398

 

 

411

 

 

Eliminations

(322

)

 

(309

)

 

(330

)

 

(347

)

 

Total Operating Revenue1

$22,342

 

 

$22,715

 

 

$22,980

 

 

$23,304

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Gain / (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

$1,402

 

 

$1,048

 

 

$834

 

 

$316

 

 

Government Business

489

 

 

532

 

 

456

 

 

451

 

 

Other

(23

)

 

(21

)

 

(41

)

 

(17

)

 

Total Operating Gain1

$1,868

 

 

$1,559

 

 

$1,249

 

 

$750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

Three Months Ended

 

 

 

 

 

 

 

 

March 31, 2019

 

 

June 30, 2019

 

 

 

 

 

 

 

 

Operating Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

$9,392

 

 

$9,417

 

 

 

 

 

 

 

 

Government Business

14,926

 

 

15,538

 

 

 

 

 

 

 

 

Other

548

 

 

794

 

 

 

 

 

 

 

 

Eliminations

(478

)

 

(572

)

 

 

 

 

 

 

 

Total Operating Revenue1

$24,388

 

 

$25,177

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Gain / (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

$1,598

 

 

$983

 

 

 

 

 

 

 

 

Government Business

377

 

 

478

 

 

 

 

 

 

 

 

Other

(35

)

 

(28

)

 

 

 

 

 

 

 

Total Operating Gain1

$1,940

 

 

$1,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See “Basis of Presentation.”

Forward-Looking Statements

This document contains certain 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: 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; trends in healthcare costs and utilization rates; our ability to contract with providers on cost-effective and competitive terms; our ability to secure sufficient premium rates, including regulatory approval for and implementation of such rates; 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, including our claim for damages against Cigna, Cigna’s claim for payment of a termination fee and other damages against us, and the potential for such litigation to cause us to incur substantial costs, materially distract management and negatively impact our reputation and financial condition; non-compliance by any party with the pharmacy benefit management 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 any agreements governing the transition of pharmacy benefit management services provided to us from Express Scripts to CVS Health, which could result in financial penalties, our inability to meet customer demands, and sanctions imposed by governmental entities, including CMS; medical malpractice or professional liability claims or other risks related to healthcare services and pharmacy benefit management services provided by our subsidiaries; possiblerestrictions 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; 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; 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