10-QPeriod: Q3 FY2010

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

Filed November 3, 2010For Securities:ELV

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.

Financial Highlights

49 data points
Beta

Revenue

$14.57B

Net Income

$739.10M

5.1% Net Margin

EPS (Diluted)

$1.84

Total Assets

$51.03B

Cash & Equivalents

$2.25B

Free Cash Flow

$785.70M

Financial Statements
Beta
Revenue$14.57B
SG&A Expenses$2.06B
Operating Income$1.04B
Interest Expense$106.30M
Net Income$739.10M
EPS (Basic)$1.86
EPS (Diluted)$1.84
Shares Outstanding (Basic)397.60M
Shares Outstanding (Diluted)402.20M

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.

Frequently Asked Questions

Total operating revenue for the three months ended September 30, 2010, decreased by 6% to $14.3 billion compared to $15.2 billion in the same period of 2009. This decline was primarily attributed to fully-insured membership decreases in the Commercial segment, conversions from fully-insured to self-funded status, and the transition of certain UniCare members to HCSC.

Net income for the third quarter of 2010 increased slightly by 1% 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 quarter. The increase was primarily due to a prior year charge for impairment of other intangible assets that was not repeated, improved operating results in the Commercial segment, and lower other-than-temporary impairment losses on investments.

The company is actively evaluating the significant impacts of the Patient Protection and Affordable Care Act. While many provisions are still under review and require further guidance, the company anticipates potential material effects on its future operations, business model, and results of operations, including potential impairments of goodwill and other intangible assets. Specific areas of focus include minimum medical loss ratio requirements and the structure of future insurance exchanges.

Elevance Health (WellPoint) demonstrated a strong commitment to returning capital to shareholders. During the nine months ended September 30, 2010, the company repurchased approximately 58.9 million shares for an aggregate cost of $3.3 billion. The company's Board of Directors also increased the share repurchase authorization, indicating continued intent to utilize share buybacks as a capital management strategy.