10-QPeriod: Q3 FY2009

Elevance Health, Inc. Quarterly Report for Q3 Ended Sep 30, 2009

Filed October 28, 2009For Securities:ELV

Summary

Elevance Health, Inc. (formerly WellPoint, Inc.) reported its financial results for the quarter ending September 30, 2009. Total revenues saw a slight increase of 3% year-over-year to $15.4 billion, primarily driven by a modest rise in administrative fees and other revenues, which offset a slight decline in premium revenue. Net income for the quarter was $730.2 million, a decrease of 11% compared to the same period in the prior year. This decline was attributed to increased income tax expense, higher administrative expenses, and intangible asset impairments, despite a reduction in benefit expenses and other-than-temporary investment losses. Key balance sheet movements include a decrease in cash and cash equivalents to $1.84 billion from $2.18 billion, alongside a significant increase in investments available-for-sale, particularly fixed maturity securities, reflecting a shift in asset allocation. The company's total assets grew to $49.5 billion. Total liabilities decreased slightly to $26.6 billion, leading to an increase in total shareholders' equity to $22.9 billion, bolstered by retained earnings and a positive swing in accumulated other comprehensive income.

Financial Highlights

51 data points
Beta

Revenue

$15.43B

99.3% Gross Margin

Net Income

$730.20M

4.7% Net Margin

EPS (Diluted)

$1.53

Total Assets

$49.50B

Cash & Equivalents

$1.84B

Free Cash Flow

$1.33B

Financial Statements
Beta
Revenue$15.43B
Cost of Revenue$112.70M
Gross Profit$15.31B
SG&A Expenses$2.26B
Operating Income$1.28B
Interest Expense$110.60M
Net Income$730.20M
EPS (Basic)$1.55
EPS (Diluted)$1.53
Shares Outstanding (Basic)472
Shares Outstanding (Diluted)477

Key Highlights

  • 1Total revenues for the third quarter of 2009 were $15.4 billion, a 3% increase from $14.96 billion in Q3 2008.
  • 2Net income for the quarter was $730.2 million, a decrease of 11% from $820.7 million in Q3 2008.
  • 3Diluted EPS was $1.53, down from $1.60 in the prior year's comparable quarter.
  • 4Benefit expense decreased by 3% year-over-year to $11.4 billion, reflecting membership declines and favorable reserve releases.
  • 5Selling, general, and administrative expenses increased by 8% to $2.4 billion, leading to a higher SG&A expense ratio.
  • 6The company recorded a significant $205.5 million pre-tax impairment charge related to its UniCare tradenames.
  • 7Operating cash flow for the nine months ended September 30, 2009 was $3.0 billion, a substantial increase from $2.1 billion in the same period of 2008.

Frequently Asked Questions

Total revenues increased by 3% to $15.4 billion, primarily due to a slight decrease in premium revenue offset by increases in administrative fees and other revenue. Premium revenue was impacted by membership declines in Commercial and Consumer businesses due to economic conditions, while administrative fees benefited from growth in certain segments and acquisitions.

The decrease in net income was mainly due to higher income tax expense (partially influenced by IRS settlements in the prior year), increased administrative expenses, and a significant $205.5 million impairment charge for UniCare tradenames. These factors were partially offset by lower benefit expenses and reduced other-than-temporary impairment losses on investments.

The company reported a net realized gain on investments of $52.2 million for the quarter, a significant increase from $1.8 million in the prior year. However, other-than-temporary impairment losses recognized in income were $30.7 million, compared to $564.4 million in the prior year, indicating a substantial improvement in investment impairments from the previous year's level.

The $205.5 million pre-tax impairment charge for UniCare tradenames was triggered by the anticipated closing of the Express Scripts transaction (sale of PBM business), expected decline in Medicare Part D auto-assigned membership, and the transition of UniCare commercial members in Illinois and Texas. This charge reflects a reduction in the carrying value of these intangible assets due to reduced future cash flow expectations.