Elevance Health, Inc. Quarterly Report for Q3 Ended Sep 30, 2010

Summary

Elevance Health, Inc. (formerly WellPoint, Inc.) reported its third-quarter 2010 financial results, showing a slight increase in net income to $739.1 million, or $1.84 per diluted share, compared to $730.2 million, or $1.53 per diluted share, in the prior year. This improvement was driven by a one-time charge in the prior year related to intangible asset impairment and increased realized investment gains, partially offset by a decline in operating revenue. Total operating revenue for the quarter decreased by 6% to $14.3 billion, largely due to membership declines in fully-insured plans within the Commercial segment and the conversion of some accounts to self-funded status. The company noted that despite revenue headwinds, disciplined pricing and cost management led to an improved benefit expense ratio and a lower selling, general, and administrative expense ratio. The company also repurchased approximately $3.3 billion of its common stock year-to-date, demonstrating a commitment to returning capital to shareholders. Looking at the nine-month period, net income increased significantly by 17% to $2.3 billion, or $5.52 per diluted share, compared to $2.0 billion, or $4.12 per diluted share, in the prior year. This substantial growth was fueled by a significant reduction in other-than-temporary impairment losses on investments and increased realized investment gains, alongside improved operating performance in the Commercial segment. Total operating revenue for the nine months decreased by 5% to $43.4 billion, reflecting ongoing challenges from membership declines and the sale of the PBM business. The company continues to navigate a complex regulatory environment, including the implications of the newly enacted healthcare reform legislation, while executing on its strategic priorities.

Key Highlights

• 1Net income for the three months ended September 30, 2010, increased 1% to $739.1 million compared to the prior year quarter.
• 2Diluted EPS for the three months ended September 30, 2010, increased 20% to $1.84, benefiting from share repurchases.
• 3Total operating revenue decreased 6% to $14.3 billion for the third quarter of 2010, primarily due to membership declines in fully-insured plans and conversions to self-funded status.
• 4For the nine months ended September 30, 2010, net income increased 17% to $2.3 billion, driven by lower investment impairment losses.
• 5The company repurchased approximately $3.3 billion of its common stock year-to-date as of September 30, 2010.
• 6Benefit expense ratio improved to 83.8% for the third quarter, indicating better cost management.
• 7The company highlighted ongoing evaluation of the impact of the Patient Protection and Affordable Care Act on its business.

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