Investors

Press Release

Back
Anthem Reports Third Quarter 2019 Results
  • Third quarter net income was $4.55 per share, including net negative adjustment items of $0.32 per share. Adjusted net income was $4.87* per share.
  • Operating revenue increased $3.5 billion, or 15.1 percent, over the prior year quarter to $26.4 billion.
  • Medical enrollment was 41.0 million members, an increase of 1.1 million members over the prior year quarter, driven by growth in the fully insured businesses.
  • The Company now expects full year net income to be greater than $18.45 per share. Full year adjusted net income is now expected to be greater than $19.40* per share.
  • Fourth quarter 2019 dividend of $0.80 per share declared to shareholders. 

INDIANAPOLIS--(BUSINESS WIRE)--Oct. 23, 2019-- Anthem, Inc. (NYSE: ANTM) today announced third quarter financial results driven by strong revenue growth and improved operational execution.

"Anthem's third quarter results showed continued membership growth – together with strong operating revenue growth – giving us great momentum as we head into 2020," said Gail K. Boudreaux, President and CEO.

"I am pleased with our success to date as we remain committed to delivering a simpler, more affordable and more personalized healthcare experience for those we serve."

* Refer to the GAAP reconciliation tables.

CONSOLIDATED HIGHLIGHTS

Membership: Medical enrollment totaled approximately 41.0 million members at September 30, 2019, an increase of 1.1 million, or 2.7 percent, from September 30, 2018. Total fully insured enrollment grew by 968 thousand lives, or 6.6 percent, and self-funded enrollment grew by 115 thousand lives, or 0.5 percent. Government Business enrollment increased by 864 thousand lives as the Company experienced growth in Medicaid and Medicare. Commercial & Specialty Business enrollment increased by 219 thousand lives driven by growth in the National and Individual businesses, partially offset by a decline in Local Group enrollment.

Medical enrollment increased sequentially by 132 thousand lives during the third quarter of 2019, reflecting growth in Medicaid and Medicare, partially offset by declines in Commercial & Specialty Business enrollment.

Operating Revenue: Operating revenue was $26.4 billion in the third quarter of 2019, an increase of $3.5 billion, or 15.1 percent, versus the prior year quarter. The increase in operating revenue reflected membership growth across our businesses, premium rate increases to cover overall cost trends, and growth in our value-added services, including our pharmacy and integrated health offerings. 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 87.2 percent in the third quarter of 2019, an increase of 240 basis points from 84.8 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 expectation during the first nine 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 39.8 days as of September 30, 2019, an increase of 0.7 days from 39.1 days as of June 30, 2019.

SG&A Expense Ratio: The SG&A expense ratio was 12.9 percent in the third quarter of 2019, a decrease of 250 basis points from 15.4 percent in the third 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 third quarter of 2019 was $1.7 billion, or 1.4 times net income, and an increase of $1.1 billion compared to the third quarter of 2018. Operating cash flow was $4.7 billion, or 1.2 times net income for the nine months ending September 30, 2019.

Share Repurchase Program: During the third quarter of 2019, the Company repurchased 2.4 million shares of its common stock for $644 million, or a weighted average price of $266.52. As of September 30, 2019, the Company had approximately $4.1 billion of Board-approved share repurchase authorization remaining.

Cash Dividend: During the third quarter of 2019, the Company paid a quarterly dividend of $0.80 per share, representing a distribution of cash totaling $204 million.

On October 22, 2019, the Audit Committee declared a fourth 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 fourth quarter dividend is payable on December 20, 2019 to shareholders of record at the close of business on December 5, 2019.

Investment Portfolio & Capital Position: During the third quarter of 2019, the Company recorded net realized gains of $1 million and other-than-temporary impairment losses totaling $13 million. During the third quarter of 2018, the Company recorded net realized gains of $27 million and other-than-temporary impairment losses totaling $6 million.

As of September 30, 2019, the Company’s net unrealized gain position in the investment portfolio was $711 million, consisting of fixed maturity securities. As of September 30, 2019 cash and investments at the parent company totaled approximately $3.0 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 September 30

 

 

Nine Months Ended September 30

 

 

 

 

   

2019

 

2018

 

Change

 

 

2019

 

2018

 

Change

 

 

 

Operating Revenue

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

   

$9,284

 

 

$8,933

 

 

3.9

%

 

 

$28,093

 

 

$26,939

 

 

4.3

%

 

 

 

Government Business

   

15,955

 

 

13,979

 

 

14.1

%

 

 

46,419

 

 

40,951

 

 

13.4

%

 

 

 

Other

   

2,508

 

 

398

 

 

530.2

%

 

 

3,850

 

 

1,108

 

 

247.5

%

 

 

 

Eliminations

   

(1,303

)

 

(330

)

 

NM2

 

 

(2,353

)

 

(961

)

 

NM2

 

 

 

Total Operating Revenue1

   

$26,444

 

$22,980

 

15.1

%

 

 

$76,009

 

$68,037

 

11.7

%

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Gain / (Loss)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

   

$930

 

 

$834

 

 

11.5

%

 

 

$3,511

 

 

$3,284

 

 

6.9

%

 

 

 

Government Business

   

616

 

 

456

 

 

35.1

%

 

 

1,471

 

 

1,477

 

 

(0.4

)%

 

 

 

Other

   

(18

)

 

(41

)

 

NM2

 

 

(81

)

 

(85

)

 

NM2

 

 

 

Total Operating Gain1

   

$1,528

 

$1,249

 

22.3

%

 

 

$4,901

 

 

$4,676

 

 

4.8

%

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Margin

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

   

10.0

%

 

9.3

%

 

70 bp

 

 

12.5

%

 

12.2

%

 

30 bp

 

 

 

Government Business

   

3.9

%

 

3.3

%

 

60 bp

 

 

3.2

%

 

3.6

%

 

(40) bp

 

 

 

Total Operating Margin1

   

5.8

%

 

5.4

%

 

40 bp

 

 

6.4

%

 

6.9

%

 

(50) bp

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled $930 million in the third quarter of 2019, an increase of $96 million, or 11.5 percent, from $834 million in the third quarter of 2018. The increase is primarily driven by greater penetration of value-added services, including our pharmacy and integrated health offerings, partially offset by unfavorable reserve development.

Government Business: Operating gain in the Government Business segment was $616 million in the third quarter of 2019, an increase of $160 million, or 35.1 percent, from $456 million in the third quarter of 2018. The increase is driven by improved medical cost performance in Medicaid partially offset by the one year waiver of the health insurance tax.

Other: The Company reported an operating loss of $18 million in the Other segment for the third quarter of 2019, compared with an operating loss of $41 million in the prior year quarter.

OUTLOOK

Full Year 2019:

  • GAAP net income is now expected to be greater than $18.45 per share, including approximately $0.95 per share of net unfavorable items. Excluding these items, adjusted net income is now expected to be greater than $19.40*.
  • Medical membership is now expected to be approximately 41.0 million. Fully-insured membership is now expected to be approximately 15.6 million and self-funded membership now is expected to be approximately 25.4 million.
  • Operating revenue is now expected to be approximately $103.0 billion, including premium revenue of $94.0 billion - $95.0 billion.
  • Benefit expense ratio is now expected to be in the range of 86.5% - 86.8%.
  • SG&A ratio is now expected to be in the range of 13.0% - 13.3%.
  • Operating cash flow is now expected to be greater than $5.5 billion.
  • Share count is now expected to be approximately 260 - 261 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 Daylight Time (“EDT”) to discuss the company’s third 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:

877-260-8898 (Domestic)

   

800-475-6701 (Domestic Replay)

 

612-332-0530 (International)

   

320-365-3844 (International Replay)

 

An access code is not required for today’s conference call. The access code for the replay is 432048. The replay will be available from 11:00 a.m. EDT today, until the end of the day on November 6, 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 77 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

 

September 30,

2019

 

September 30,
2018

 

December 31,

2018

 

September 30,
2018

 

December 31,
2018

Customer Type

 

 

 

 

 

 

 

 

 

 

Local Group

 

15,659

 

 

15,688

 

 

15,733

 

 

(0.2

)%

 

(0.5

)%

Individual

 

711

 

 

692

 

 

655

 

 

2.7

%

 

8.5

%

 

 

 

 

 

 

 

 

 

 

 

National:

 

 

 

 

 

 

 

 

 

 

National Accounts

 

7,666

 

 

7,610

 

 

7,588

 

 

0.7

%

 

1.0

%

BlueCard®

 

5,967

 

 

5,794

 

 

5,838

 

 

3.0

%

 

2.2

%

Total National

 

13,633

 

 

13,404

 

 

13,426

 

 

1.7

%

 

1.5

%

 

 

 

 

 

 

 

 

 

 

 

Medicare:

 

 

 

 

 

 

 

 

 

 

Medicare Advantage

 

1,203

 

 

992

 

 

1,006

 

 

21.3

%

 

19.6

%

Medicare Supplement

 

893

 

 

837

 

 

846

 

 

6.7

%

 

5.6

%

Total Medicare

 

2,096

 

 

1,829

 

 

1,852

 

 

14.6

%

 

13.2

%

 

 

 

 

 

 

 

 

 

 

 

Medicaid

 

7,293

 

 

6,731

 

 

6,716

 

 

8.3

%

 

8.6

%

Federal Health Products & Services

 

1,592

 

 

1,557

 

 

1,556

 

 

2.2

%

 

2.3

%

Total Medical Membership

 

40,984

 

 

39,901

 

 

39,938

 

 

2.7

%

 

2.6

%

Funding Arrangement

 

 

 

 

 

 

 

 

 

 

Self-Funded

 

25,368

 

 

25,253

 

 

25,287

 

 

0.5

%

 

0.3

%

Fully-Insured

 

15,616

 

 

14,648

 

 

14,651

 

 

6.6

%

 

6.6

%

Total Medical Membership

 

40,984

 

 

39,901

 

 

39,938

 

 

2.7

%

 

2.6

%

Reportable Segment

 

 

 

 

 

 

 

 

 

 

Commercial & Specialty Business

 

30,003

 

 

29,784

 

 

29,814

 

 

0.7

%

 

0.6

%

Government Business

 

10,981

 

 

10,117

 

 

10,124

 

 

8.5

%

 

8.5

%

Total Medical Membership

 

40,984

 

 

39,901

 

 

39,938

 

 

2.7

%

 

2.6

%

Other Membership

 

 

 

 

 

 

 

 

 

 

Life and Disability Members

 

4,970

 

 

4,701

 

 

4,795

 

 

5.7

%

 

3.6

%

Dental Members

 

5,942

 

 

5,804

 

 

5,807

 

 

2.4

%

 

2.3

%

Dental Administration Members

 

5,526

 

 

5,367

 

 

5,327

 

 

3.0

%

 

3.7

%

Vision Members

 

7,232

 

 

6,906

 

 

6,946

 

 

4.7

%

 

4.1

%

Medicare Part D Standalone Members

 

285

 

 

312

 

 

309

 

 

(8.7

)%

 

(7.8

)%

Anthem, Inc.

Consolidated Statements of Income

(Unaudited)

 

 

 

 

 

 

 

(In millions, except per share data)

 

Three Months Ended
September 30

 

 

 

 

2019

 

2018

 

Change

Revenues

 

 

 

 

 

 

Premiums

 

$

23,793

 

 

$

21,451

 

 

10.9

%

Administrative fees and other revenue

 

2,651

 

 

1,529

 

 

73.4

%

Total operating revenue

 

26,444

 

 

22,980

 

 

15.1

%

Net investment income

 

242

 

 

250

 

 

(3.2

)%

Net realized gains on financial instruments

 

1

 

 

27

 

 

(96.3

)%

Other-than-temporary impairment losses on investments:

 

 

 

 

 

 

Total other-than-temporary impairment losses on investments

 

(14

)

 

(8

)

 

NM

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

 

1

 

 

2

 

 

(50.0

)%

Other-than-temporary impairment losses recognized in income

 

(13

)

 

(6

)

 

NM

 

 

 

 

 

 

 

Total revenues

 

26,674

 

 

23,251

 

 

14.7

%

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

Benefit expense

 

20,753

 

 

18,185

 

 

14.1

%

Cost of products sold

 

745

 

 

 

 

NM

Selling, general and administrative expense

 

3,418

 

 

3,546

 

 

(3.6

)%

Interest expense

 

185

 

 

188

 

 

(1.6

)%

Amortization of other intangible assets

 

84

 

 

91

 

 

(7.7

)%

Gain on extinguishment of debt

 

 

 

(1

)

 

NM

 

 

 

 

 

 

 

Total expenses

 

25,185

 

 

22,009

 

 

14.4

%

 

 

 

 

 

 

 

Income before income tax expense

 

1,489

 

 

1,242

 

 

19.9

%

 

 

 

 

 

 

 

Income tax expense

 

306

 

 

282

 

 

8.5

%

 

 

 

 

 

 

 

Net income

 

$

1,183

 

 

$

960

 

 

23.2

%

 

 

 

 

 

 

 

Net income per diluted share

 

$

4.55

 

 

$

3.62

 

 

25.7

%

 

 

 

 

 

 

 

Diluted shares

 

260.0

 

 

265.4

 

 

(2.0

)%

 

 

 

 

 

 

 

Benefit expense as a percentage of premiums

 

87.2

%

 

84.8

%

 

240

bp

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

 

12.9

%

 

15.4

%

 

(250

)bp

Income before income taxes as a percentage of total revenue

 

5.6

%

 

5.3

%

 

30

bp

                   

"NM" = calculation not meaningful

Anthem, Inc.

Consolidated Statements of Income

(Unaudited)

 

 

 

 

 

 

 

(In millions, except per share data)

 

Nine Months Ended
September 30

 

 

 

 

2019

 

2018

 

Change

Revenues

 

 

 

 

 

 

Premiums

 

$

70,137

 

 

$

63,602

 

 

10.3

%

Administrative fees and other revenue

 

5,872

 

 

4,435

 

 

32.4

%

Total operating revenue

 

76,009

 

 

68,037

 

 

11.7

%

Net investment income

 

737

 

 

708

 

 

4.1

%

Net realized gains on financial instruments

 

90

 

 

5

 

 

NM

Other-than-temporary impairment losses on investments:

 

 

 

 

 

 

Total other-than-temporary impairment losses on investments

 

(36

)

 

(20

)

 

NM

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

 

6

 

 

2

 

 

NM

Other-than-temporary impairment losses recognized in income

 

(30

)

 

(18

)

 

NM

 

 

 

 

 

 

 

Total revenues

 

76,806

 

 

68,732

 

 

11.7

%

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

Benefit expense

 

60,403

 

 

52,959

 

 

14.1

%

Cost of products sold

 

843

 

 

 

 

NM

Selling, general and administrative expense

 

9,862

 

 

10,402

 

 

(5.2

)%

Interest expense

 

556

 

 

564

 

 

(1.4

)%

Amortization of other intangible assets

 

256

 

 

265

 

 

(3.4

)%

(Gain) loss on extinguishment of debt

 

(1

)

 

17

 

 

NM

 

 

 

 

 

 

 

Total expenses

 

71,919

 

 

64,207

 

 

12.0

%

 

 

 

 

 

 

 

Income before income tax expense

 

4,887

 

 

4,525

 

 

8.0

%

 

 

 

 

 

 

 

Income tax expense

 

1,014

 

 

1,200

 

 

(15.5

)%

 

 

 

 

 

 

 

Net income

 

$

3,873

 

 

$

3,325

 

 

16.5

%

 

 

 

 

 

 

 

Net income per diluted share

 

$

14.83

 

 

$

12.58

 

 

17.9

%

 

 

 

 

 

 

 

Diluted shares

 

261.1

 

 

264.3

 

 

(1.2

)%

 

 

 

 

 

 

 

Benefit expense as a percentage of premiums

 

86.1

%

 

83.3

%

 

280

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

 

6.4

%

 

6.6

%

 

(20

)bp

                   

"NM" = calculation not meaningful

Anthem, Inc.

Consolidated Balance Sheets

 

(In millions)

   

September 30,
2019

 

 

December 31,
2018

Assets

   

(Unaudited)

 

 

 

Current assets:

   

 

 

 

 

Cash and cash equivalents

   

$

4,190

 

 

 

$

3,934

 

Fixed maturity securities, current

   

19,960

 

 

 

16,692

 

Equity securities, current

   

2,300

 

 

 

1,493

 

Other invested assets, current

   

10

 

 

 

21

 

Accrued investment income

   

168

 

 

 

162

 

Premium receivables

   

4,782

 

 

 

4,465

 

Self-funded receivables

   

2,555

 

 

 

2,278

 

Other receivables

   

2,870

 

 

 

2,558

 

Income taxes receivable

   

91

 

 

 

10

 

Securities lending collateral

   

465

 

 

 

604

 

Other current assets

   

2,113

 

 

 

2,104

 

Total current assets

   

39,504

 

 

 

34,321

 

 

   

 

 

 

 

Long-term investments:

   

 

 

 

 

Fixed maturity securities

   

518

 

 

 

487

 

Equity securities

   

29

 

 

 

33

 

Other invested assets

   

3,914

 

 

 

3,726

 

Property and equipment, net

   

2,921

 

 

 

2,735

 

Goodwill

   

20,500

 

 

 

20,504

 

Other intangible assets

   

8,756

 

 

 

9,007

 

Other noncurrent assets

   

1,667

 

 

 

758

 

Total assets

   

$

77,809

 

 

 

$

71,571

 

 

   

 

 

 

 

Liabilities and shareholders’ equity

   

 

 

 

 

Liabilities

   

 

 

 

 

Current liabilities:

   

 

 

 

 

Policy liabilities:

   

 

 

 

 

Medical claims payable

   

$

8,977

 

 

 

$

7,454

 

Reserves for future policy benefits

   

77

 

 

 

75

 

Other policyholder liabilities

   

2,503

 

 

 

2,590

 

Total policy liabilities

   

11,557

 

 

 

10,119

 

Unearned income

   

948

 

 

 

902

 

Accounts payable and accrued expenses

   

4,445

 

 

 

4,959

 

Security trades pending payable

   

542

 

 

 

197

 

Securities lending payable

   

465

 

 

 

604

 

Short-term borrowings

   

710

 

 

 

1,145

 

Current portion of long-term debt

   

700

 

 

 

849

 

Other current liabilities

   

3,867

 

 

 

3,190

 

Total current liabilities

   

23,234

 

 

 

21,965

 

 

   

 

 

 

 

Long-term debt, less current portion

   

18,820

 

 

 

17,217

 

Reserves for future policy benefits, noncurrent

   

661

 

 

 

706

 

Deferred tax liabilities, net

   

2,140

 

 

 

1,960

 

Other noncurrent liabilities

   

1,622

 

 

 

1,182

 

Total liabilities

   

46,477

 

 

 

43,030

 

 

   

 

 

 

 

Shareholders’ equity

   

 

 

 

 

Common stock

   

3

 

 

 

3

 

Additional paid-in capital

   

9,524

 

 

 

9,536

 

Retained earnings

   

22,104

 

 

 

19,988

 

Accumulated other comprehensive loss

   

(299

)

 

 

(986

)

Total shareholders’ equity

   

31,332

 

 

 

28,541

 

Total liabilities and shareholders’ equity

   

$

77,809

 

 

 

$

71,571

 

Anthem, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

   

 

 

 

 

(In millions)

   

Nine Months Ended September 30

 

   

2019

 

 

2018

Operating activities

   

 

 

 

 

Net income

   

$3,873

     

$3,325

 

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

               

Net realized gains on financial instruments

   

(90

)

 

 

(5

)

Other-than-temporary impairment losses recognized in income

   

30

 

 

 

18

 

(Gain) loss on extinguishment of debt

   

(1

)

 

 

17

 

Loss on disposal of assets

   

1

 

 

 

2

 

Deferred income taxes

   

(29

)

 

 

141

 

Amortization, net of accretion

   

778

 

 

 

752

 

Depreciation expense

   

109

 

 

 

92

 

Share-based compensation

   

226

 

 

 

135

 

Changes in operating assets and liabilities:

   

 

 

 

 

Receivables, net

   

(880

)

 

 

(823

)

Other invested assets

   

(30

)

 

 

(17

)

Other assets

   

(280

)

 

 

(734

)

Policy liabilities

   

1,394

 

 

 

(556

)

Unearned income

   

46

 

 

 

(42

)

Accounts payable and accrued expenses

   

(931

)

 

 

756

 

Other liabilities

   

675

 

 

 

190

 

Income taxes

   

(81

)

 

 

273

 

Other, net

   

(76

)

 

 

(160

)

Net cash provided by operating activities

   

4,734

 

 

 

3,364

 

 

   

 

 

 

 

Investing activities

   

 

 

 

 

Purchases of fixed maturity securities

   

(7,616

)

 

 

(6,790

)

Proceeds from sales and maturities of fixed maturity securities

   

5,502

 

 

 

6,413

 

Purchases of equity securities

   

(9,408

)

 

 

(812

)

Proceeds from sales of equity securities

   

8,671

 

 

 

2,119

 

Purchases of other invested assets

   

(286

)

 

 

(324

)

Proceeds from sales of other invested assets

   

242

 

 

 

251

 

Changes in securities lending collateral

   

139

 

 

 

(286

)

Purchases of subsidiaries, net of cash acquired

   

 

 

 

(1,732

)

Net purchases of property and equipment

   

(726

)

 

 

(888

)

Other, net

   

(33

)

 

 

17

 

Net cash used in investing activities

   

(3,515

)

 

 

(2,032

)

 

   

 

 

 

 

Financing activities

   

 

 

 

 

Net repayments of commercial paper borrowings

   

(197

)

 

 

(54

)

Net repayments of short-term borrowings

   

(435

)

 

 

(5

)

Net proceeds from (repayments of) long-term borrowings

   

1,550

 

 

 

(558

)

Changes in securities lending payable

   

(139

)

 

 

287

 

Changes in bank overdrafts

   

250

 

 

 

97

 

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

   

 

 

 

1,250

 

Repurchase and retirement of common stock

   

(1,396

)

 

 

(1,192

)

Change in collateral and settlements of debt-related derivatives

   

(34

)

 

 

22

 

Cash dividends

   

(616

)

 

 

(583

)

Proceeds from issuance of common stock under employee stock plans

   

137

 

 

 

133

 

Taxes paid through withholding of common stock under employee stock plans

   

(82

)

 

 

(77

)

Net cash used in financing activities

   

(962

)

 

 

(680

)

 

   

 

 

 

 

Effect of foreign exchange rates on cash and cash equivalents

   

(1

)

 

 

(1

)

 

   

 

 

 

 

Change in cash and cash equivalents

   

256

 

 

 

651

 

Cash and cash equivalents at beginning of year

   

3,934

 

 

 

3,609

 

Cash and cash equivalents at end of period

   

$4,190

     

$4,260

 

Anthem, Inc.

Reconciliation of Medical Claims Payable

 

 

 

Nine Months Ended
September 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

 

58,157

 

 

51,396

 

 

69,581

 

 

70,377

 

 

64,868

 

Prior years redundancies(1)

 

(437

)

 

(858

)

 

(930

)

 

(1,133

)

 

(835

)

Total net incurred medical claims

 

57,720

 

 

50,538

 

 

68,651

 

 

69,244

 

 

64,033

 

 

 

 

 

 

 

 

 

 

 

 

Net payments attributable to:

 

 

 

 

 

 

 

 

 

 

Current year medical claims

 

49,751

 

 

44,511

 

 

62,748

 

 

62,923

 

 

57,879

 

Prior years medical claims

 

6,466

 

 

6,504

 

 

6,579

 

 

5,805

 

 

5,751

 

Total net payments

 

56,217

 

 

51,015

 

 

69,327

 

 

68,728

 

 

63,630

 

 

 

 

 

 

 

 

 

 

 

 

Net medical claims payable, end of period

 

8,735

 

 

7,431

 

 

7,232

 

 

7,709

 

 

7,117

 

Ceded medical claims payable, end of period

 

35

 

 

37

 

 

34

 

 

105

 

 

539

 

Gross medical claims payable, end of period

 

$

8,770

 

 

$

7,468

 

 

$

7,266

 

 

$

7,814

 

 

$

7,656

 

 

 

 

 

 

 

 

 

 

 

 

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

 

85.5

%

 

86.6

%

 

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

 

6.4

%

 

12.5

%

 

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
September 30

 

 

 

Nine Months Ended
September 30

 

 

(In millions, except per share data)

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Net income

 

$

1,183

 

 

$

960

 

 

23.2

%

 

$

3,873

 

 

$

3,325

 

 

16.5

%

Add / (Subtract):

 

 

 

 

 

 

 

 

 

 

 

 

Net realized (gains) losses on financial instruments

 

(1

)

 

(27

)

 

 

 

(90

)

 

(5

)

 

 

Amortization of other intangible assets

 

84

 

 

91

 

 

 

 

256

 

 

265

 

 

 

Other-than-temporary impairment losses recognized in income

 

13

 

 

6

 

 

 

 

30

 

 

18

 

 

 

(Gain) loss on extinguishment of debt

 

 

 

(1

)

 

 

 

(1

)

 

17

 

 

 

Transaction and integration related costs

 

3

 

 

 

 

 

 

8

 

 

9

 

 

 

Litigation expenses

 

9

 

 

 

 

 

 

44

 

 

 

 

 

Tax impact of non-GAAP adjustments

 

(24

)

 

(18

)

 

 

 

(61

)

 

(73

)

 

 

Net adjustment items

 

84

 

 

51

 

 

 

 

186

 

 

231

 

 

 

Adjusted net income

 

$

1,267

 

 

$

1,011

 

 

25.3

%

 

$

4,059

 

 

$

3,556

 

 

14.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

4.55

 

 

$

3.62

 

 

25.7

%

 

$

14.83

 

 

$

12.58

 

 

17.9

%

Add / (Subtract):

 

 

 

 

 

 

 

 

 

 

 

 

Net realized (gains) losses on financial instruments

 

 

 

(0.10

)

 

 

 

(0.34

)

 

(0.02

)

 

 

Amortization of other intangible assets

 

0.32

 

 

0.34

 

 

 

 

0.98

 

 

1.00

 

 

 

Other-than-temporary impairment losses recognized in income

 

0.05

 

 

0.02

 

 

 

 

0.11

 

 

0.07

 

 

 

(Gain) loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

0.06

 

 

 

Transaction and integration related costs

 

0.01

 

 

 

 

 

 

0.03

 

 

0.03

 

 

 

Litigation expenses

 

0.03

 

 

 

 

 

 

0.17

 

 

 

 

 

Tax impact of non-GAAP adjustments

 

(0.09

)

 

(0.07

)

 

 

 

(0.23

)

 

(0.28

)

 

 

Rounding Impact

 

 

 

 

 

 

 

 

 

0.01

 

 

 

Net adjustment items

 

0.32

 

 

0.19

 

 

 

 

0.72

 

 

0.87

 

 

 

Adjusted net income per diluted share

 

$

4.87

 

 

$

3.81

 

 

27.8

%

 

$

15.55

 

 

$

13.45

 

 

15.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2019 Outlook

 

 

 

 

 

 

 

 

Net income per diluted share

 

Greater than $18.45

 

 

 

 

 

 

 

 

Add / (Subtract):

 

 

 

 

 

 

 

 

 

 

Net realized gains on financial instruments

 

(0.34

)

 

 

 

 

 

 

 

 

Other-than-temporary impairment losses recognized in income

 

0.11

 

 

 

 

 

 

 

 

 

Transaction and integration related costs

 

0.03

 

 

 

 

 

 

 

 

 

Litigation expenses

 

0.17

 

 

 

 

 

 

 

 

 

Amortization of other intangible assets

 

Approximately $1.30

 

 

 

 

 

 

 

 

Tax impact of non-GAAP adjustments

 

Approximately ($0.32)

 

 

 

 

 

 

 

 

Net adjustment items

 

Approximately $0.95

 

 

 

 

 

 

 

 

Adjusted net income per diluted share

 

Greater than $19.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30

 

 

 

Nine Months Ended
September 30

 

 

(In millions)

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Reportable segments operating gain

 

$

1,528

 

 

$

1,249

 

 

22.3

%

 

$

4,901

 

 

$

4,676

 

 

4.8

%

Net investment income

 

242

 

 

250

 

 

 

 

737

 

 

708

 

 

 

Net realized gains (losses) on financial instruments

 

1

 

 

27

 

 

 

 

90

 

 

5

 

 

 

Other-than-temporary impairment losses recognized in income

 

(13

)

 

(6

)

 

 

 

(30

)

 

(18

)

 

 

Interest expense

 

(185

)

 

(188

)

 

 

 

(556

)

 

(564

)

 

 

Amortization of other intangible assets

 

(84

)

 

(91

)

 

 

 

(256

)

 

(265

)

 

 

Gain (loss) on extinguishment of debt

 

 

 

1

 

 

 

 

1

 

 

(17

)

 

 

Income before income tax expense

 

$

1,489

 

 

$

1,242

 

 

19.9

%

 

$

4,887

 

 

$

4,525

 

 

8.0

%

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; 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; 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