01—Abstract
Summary
Summary of the 10-K filed February 21, 2018. Cited figures are marked; the original filing is the authoritative source.
Elevance Health, Inc. (formerly Anthem, Inc.) reported strong financial performance for the year ended December 31, 2017.
Total operating revenue increased by 5.8% to $89.1 billiona, driven by higher premium revenue across its Government and Commercial & Specialty Business segments. Net income saw a substantial increase of 55.6% to $3.8 billion, primarily due to lower income tax expenses and improved investment activities. Diluted earnings per share (EPS) also rose significantly by 55.8% to $14.35.
The company's medical membership grew slightly to 40.2 million, with notable increases in Medicare and Local Group memberships, partially offset by decreases in Individual and National Accounts. The company continued its growth strategy through strategic acquisitions, notably the acquisition of HealthSun in December 2017, which is expected to bolster its Medicare Advantage and dual-eligible populations. Elevance Health also made progress in establishing its own pharmacy benefits manager, IngenioRx, and secured a five-year agreement with CVS Health to manage these services starting in 2020, coinciding with the conclusion of its current agreement with Express Scripts.
This strategic move towards vertical integration in pharmacy benefits management signals a move to control costs and enhance service offerings. Despite a challenging regulatory environment, particularly concerning the Affordable Care Act (ACA), Elevance Health demonstrated resilience and strategic focus. The company highlighted its reduced participation in the Individual ACA-compliant marketplaces for 2018, focusing only on rating regions with a higher degree of confidence in market sustainability.
This demonstrates a disciplined approach to managing risks associated with market uncertainties. Overall, the filing indicates a robust operational performance, strategic expansion initiatives, and a proactive approach to navigating the evolving healthcare landscape.
02—Key points
Key Highlights
- Total operating revenue increased 5.8% to $89.1 billion in 2017.
- Net income rose 55.6% to $3.8 billion, with diluted EPS reaching $14.35.
- Medical membership grew to 40.2 million, driven by Medicare and Local Group segments.
- Acquired HealthSun in December 2017 to expand Medicare Advantage offerings.
- Announced the formation of IngenioRx and a PBM agreement with CVS Health, effective 2020.
- Reduced participation in Individual ACA marketplaces to focus on sustainable markets.
- Repurchased common stock and paid dividends, reflecting strong cash flow and capital management.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Elevance Health, Inc. kept $0.04.
- Revenue$90.04B100.0%
- Cost of revenue$-00.0%
- Gross profit$90.04B100.0%
- Operating costs−$85.86B95.4%
- Operating income$4.17B4.6%
- Interest, other & tax−$332.0M0.4%
- Net income$3.84B4.3%
Where FY2017 revenue went
$90.04B- Other operating costs: $73.22B, 81% of revenue
- SG&A: $12.65B, 14% of revenue
- Net income: $3.84B, 4.3% of revenue
- Cost of revenue: $0, 0.0% of revenue
Kept 4.3% as net incomeCost of revenue $0 · 0.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 21, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $90.04B$84.86B | +6.1% |
| Cost of Revenue | $0— | — |
| Gross Profit | $90.04B— | — |
| SG&A Expenses | $12.65B$12.56B | +0.7% |
| Operating Income | $4.17B$4.80B | −13.0% |
| Interest Expense | $739.00M$723.00M | +2.2% |
| Net Income | $3.84B$2.47B | +55.6% |
| EPS (Basic) | $14.70$9.39 | +56.5% |
| EPS (Diluted) | $14.35$9.21 | +55.8% |
| Shares Outstanding (Basic) | 261.50M262.90M | −0.5% |
| Shares Outstanding (Diluted) | 267.80M268.10M | −0.1% |
05—Questions
Frequently Asked Questions
What was Elevance Health's (Anthem's) overall financial performance in 2017?
Elevance Health reported a strong financial performance in 2017. Total operating revenue increased by 5.8% to $89.1 billion, primarily driven by growth in premium revenue from its Government and Commercial & Specialty Business segments. Net income saw a significant increase of 55.6% to $3.8 billion, resulting in diluted earnings per share of $14.35, up from $9.21 in 2016. This growth was attributed to factors including lower income tax expenses and improved investment income.
What were the key growth drivers for Elevance Health in 2017?
Key growth drivers included an increase in medical membership, reaching 40.2 million, with notable growth in the Medicare segment and Local Group business. The company also pursued strategic growth through acquisitions, such as the purchase of HealthSun in December 2017, aimed at strengthening its position in the Medicare Advantage market. Furthermore, the strategic decision to establish its own pharmacy benefits manager, IngenioRx, and partner with CVS Health for PBM services, signals a long-term strategy to enhance value and control costs.
How did the company manage risks related to the Affordable Care Act (ACA) and market uncertainties?
Elevance Health demonstrated a strategic approach to navigating ACA-related uncertainties. The company significantly reduced its participation in the Individual ACA-compliant marketplaces for 2018, focusing only on rating regions where it had greater confidence in market sustainability. This includes considering factors like expected financial performance and regulatory environments. This move indicates a focus on profitability and risk management in a dynamic regulatory landscape.
What is the significance of the IngenioRx and CVS Health agreement?
The establishment of IngenioRx and the five-year agreement with CVS Health, commencing in 2020, is a significant strategic move. It represents a step towards vertical integration in pharmacy benefit management (PBM). This initiative is expected to provide greater control over prescription drug costs, enhance member services, and create new revenue streams, aligning with the company's long-term vision of transforming healthcare delivery and improving affordability.
06—Continue