10-KPeriod: FY2016

Elevance Health, Inc. Annual Report, Year Ended Dec 31, 2016

Filed February 22, 2017For Securities:ELV

Summary

Elevance Health, Inc. (formerly Anthem, Inc.) reported strong revenue growth in 2016, driven by increases in both its Government and Commercial/Specialty segments. The company highlighted a significant rise in Medicaid membership and sustained growth in National Accounts. Despite overall revenue gains, net income saw a slight decline due to increased transaction costs related to the pending acquisition of Cigna, higher interest expenses, and reduced net earnings from investments. The company's financial performance was significantly impacted by the ongoing legal and regulatory challenges surrounding the proposed Cigna merger, which introduced considerable uncertainty and transaction-related expenses. Elevance Health remains focused on its strategy of organic growth, strategic acquisitions, and efficient capital utilization, while navigating the evolving healthcare landscape influenced by regulatory changes and market dynamics.

Financial Highlights

51 data points
Beta

Revenue

$84.86B

Net Income

$2.47B

2.9% Net Margin

EPS (Diluted)

$9.21

Total Assets

$65.08B

Cash & Equivalents

$4.08B

Free Cash Flow

$2.69B

Financial Statements
Beta
Revenue$84.86B
SG&A Expenses$12.56B
Operating Income$4.80B
Interest Expense$723.00M
Net Income$2.47B
EPS (Basic)$9.39
EPS (Diluted)$9.21
Shares Outstanding (Basic)262.90M
Shares Outstanding (Diluted)268.10M

Key Highlights

  • 1Total operating revenue increased by 7.4% to $84.2 billion in 2016, primarily driven by growth in Government and Commercial/Specialty segments.
  • 2Medicaid membership saw substantial growth of 10.4%, contributing significantly to the Government Business segment's revenue increase.
  • 3Net income decreased by 3.5% to $2.5 billion in 2016, impacted by transaction costs related to the Cigna acquisition and other operational factors.
  • 4The company is actively engaged in litigation concerning its proposed acquisition of Cigna, which is subject to regulatory approvals and significant legal challenges.
  • 5Elevance Health continues to invest in care management programs and adapt its product offerings to comply with the evolving healthcare landscape, including the Affordable Care Act (ACA).
  • 6The company ended the year with a strong liquidity position, though it is navigating potential impacts from its significant debt associated with the Cigna acquisition.

Frequently Asked Questions

In 2016, Elevance Health experienced a 7.4% increase in total operating revenue, reaching $84.2 billion, driven by growth across its Government and Commercial/Specialty segments, particularly in Medicaid membership. However, net income saw a slight decrease of 3.5% to $2.5 billion due to factors including increased transaction costs associated with the pending Cigna acquisition, higher interest expenses, and reduced investment earnings.

Key risks and uncertainties include the outcome of the pending Cigna acquisition, which faces significant regulatory and legal challenges; potential impacts of changes to the Patient Protection and Affordable Care Act (ACA); the company's ability to manage healthcare costs and effectively price its products, especially in the volatile public exchange markets; potential government regulatory changes affecting Medicare and Medicaid programs; and cybersecurity risks, as evidenced by a reported cyber attack in early 2015.

Elevance Health is actively managing the complexities introduced by the ACA, which has led to new growth opportunities as well as regulatory challenges. The company has adapted its product designs, pricing strategies, and administrative processes to comply with ACA requirements, including provisions on guaranteed coverage, benefit mandates, minimum loss ratios, and public exchanges. However, the potential for future modifications or repeal of the ACA introduces ongoing uncertainty.

In July 2015, Elevance Health announced its agreement to acquire Cigna for approximately $53 billion. However, the acquisition faced significant regulatory opposition, with the U.S. Department of Justice filing a lawsuit to block it. In early 2017, a district court ruled in favor of the DOJ. Both Elevance Health and Cigna initiated litigation against each other regarding the merger agreement. Elevance Health is appealing the district court's decision and remains committed to completing the acquisition, though significant legal and regulatory hurdles remain.