01—Abstract
Summary
Summary of the 10-K filed February 18, 2010. Cited figures are marked; the original filing is the authoritative source.
Elevance Health, Inc. (formerly WellPoint, Inc.) reported solid financial performance for the year ended December 31, 2009, with total operating revenue of $60.8 billiona, a slight decrease of 1% from the previous year, primarily attributed to membership declines in its Commercial and Consumer businesses due to economic conditions.
However, net income saw a substantial increase of 91% to $4.7 billionb, resulting in diluted earnings per share of $9.88, up from $4.76 in 2008. This significant profit growth was largely driven by a substantial $2.4 billion after-tax gain from the sale of its Prescription Benefits Management (PBM) business to Express Scripts. Strategically, the company continued to focus on growth through organic membership gains and strategic acquisitions, while also actively managing its capital through a robust share repurchase program.
The company also highlighted its efforts to manage healthcare costs through various medical management programs and its commitment to improving the quality of care. Despite facing membership headwinds due to the economic downturn, Elevance Health demonstrated strong profitability, driven by operational efficiencies and a significant one-time gain from the PBM divestiture.
02—Key points
Key Highlights
- Total operating revenue for the year ended December 31, 2009, was $60.8 billion, a 1% decrease from 2008, largely due to membership declines in Commercial and Consumer segments impacted by economic conditions.
- Net income significantly increased by 91% to $4.7 billion for the year ended December 31, 2009, compared to $2.5 billion in 2008.
- Diluted earnings per share rose by 108% to $9.88 in 2009, up from $4.76 in 2008, primarily due to the gain on sale of the PBM business.
- The company completed the sale of its PBM business to Express Scripts for $4.7 billion in cash, realizing a pre-tax gain of $3.8 billion.
- Total medical membership decreased by 4% to 33.7 million members as of December 31, 2009, primarily due to declines in Local Group, State-Sponsored, Individual, and Senior businesses.
- The company repurchased approximately 57.3 million shares of its common stock for $2.6 billion during 2009 as part of its ongoing capital return strategy.
- Elevance Health faced regulatory scrutiny regarding its Medicare Advantage and Medicare Part D products, resulting in a suspension from marketing and enrollment, which was subsequently lifted, though eligibility for certain low-income subsidy beneficiaries was still pending.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Elevance Health, Inc. kept $0.07.
- Revenue$64.94B100.0%
- Cost of revenue−$419.0M0.6%
- Gross profit$64.52B99.4%
- Operating costs−$60.34B92.9%
- Operating income$4.18B6.4%
- Interest, other & tax$566.5M0.9%
- Net income$4.75B7.3%
Where FY2009 revenue went
$64.94B- Other operating costs: $51.32B, 79% of revenue
- SG&A: $9.02B, 14% of revenue
- Operating income: $4.18B, 6.4% of revenue
- Cost of revenue: $419.0M, 0.6% of revenue
Kept 6.4% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 18, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $64.94B$61.25B | +6.0% |
| Cost of Revenue | $419.00M$468.50M | −10.6% |
| Gross Profit | $64.52B$60.78B | +6.1% |
| SG&A Expenses | $9.02B$8.50B | +6.1% |
| Operating Income | $4.18B$4.35B | −3.9% |
| Interest Expense | $447.40M$469.80M | −4.8% |
| Net Income | $4.75B$2.49B | +90.5% |
| EPS (Basic) | $9.96$4.79 | +107.9% |
| EPS (Diluted) | $9.88$4.76 | +107.6% |
| Shares Outstanding (Basic) | 476.30M519.80M | −8.4% |
| Shares Outstanding (Diluted) | 480.50M523.00M | −8.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant increase in net income for 2009?
The primary driver of the substantial increase in net income for 2009 was the $2.4 billion after-tax gain realized from the sale of the company's Prescription Benefits Management (PBM) business to Express Scripts, Inc.
How did membership trends fare in 2009?
Total medical membership saw a decrease of 4% to 33.7 million members by the end of 2009. This decline was mainly attributed to lower enrollment in the Local Group, State-Sponsored, Individual, and Senior segments, influenced by challenging economic conditions and specific company strategies such as withdrawal from certain State-Sponsored programs.
What strategic actions did Elevance Health take in 2009?
Key strategic actions included the sale of its PBM business, which generated significant proceeds and allowed the company to focus on core health benefits operations. Additionally, the company continued its share repurchase program, demonstrating a commitment to returning capital to shareholders, and managed its cost of care through various medical management initiatives.
Were there any significant regulatory issues faced by the company in 2009?
Yes, Elevance Health experienced regulatory challenges with the Centers for Medicare & Medicaid Services (CMS) regarding its Medicare Advantage and Medicare Part D products. While marketing and enrollment sanctions were lifted, the company was still working to regain eligibility for certain low-income subsidy beneficiary auto-enrollment processes.
06—Continue