10-QPeriod: Q2 FY2012

Elevance Health, Inc. Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 25, 2012For Securities:ELV

Summary

Elevance Health, Inc. (formerly WellPoint, Inc.) reported its financial results for the second quarter and first half of 2012. For the second quarter, total revenues increased by 2.0% to $15.4 billion, while net income decreased by 8.3% to $643.6 million. This decrease was primarily attributed to higher litigation settlement costs, which were non-tax deductible, leading to increased general and administrative expenses and income tax expense. Diluted EPS saw a slight increase to $1.94, benefiting from a lower share count due to share repurchases. For the first half of 2012, total revenues grew by 2.8% to $30.8 billion, with net income declining by 7.9% to $1.5 billion. Similar to the quarterly results, the year-to-date decline in net income was driven by the non-tax deductible litigation settlement costs and lower operating results in the Commercial segment, partly offset by improvements in the Consumer segment. Diluted EPS for the first half increased to $4.48. The company also announced its intent to acquire Amerigroup Corporation for approximately $4.9 billion, a significant strategic move to expand its reach in serving vulnerable populations.

Financial Highlights

53 data points
Beta

Revenue

$15.40B

100.0% Gross Margin

Net Income

$643.60M

4.2% Net Margin

EPS (Diluted)

$1.94

Total Assets

$54.53B

Cash & Equivalents

$1.95B

Free Cash Flow

$419.30M

Financial Statements
Beta
Revenue$15.40B
Cost of Revenue$6.70M
Gross Profit$15.39B
SG&A Expenses$2.08B
Operating Income$991.70M
Interest Expense$117.60M
Net Income$643.60M
EPS (Basic)$1.96
EPS (Diluted)$1.94
Shares Outstanding (Basic)327.70M
Shares Outstanding (Diluted)331.20M

Key Highlights

  • 1Total revenues for Q2 2012 reached $15.4 billion, a 2.0% increase year-over-year, driven by higher premium revenue in the Consumer segment.
  • 2Net income for Q2 2012 decreased by 8.3% to $643.6 million, largely due to non-tax deductible litigation settlement costs impacting expenses and taxes.
  • 3Diluted EPS for Q2 2012 increased by 2.6% to $1.94, primarily due to a reduced share count from ongoing share repurchase programs.
  • 4The company completed the acquisition of 1-800 CONTACTS for strategic growth and diversification into the eyewear business.
  • 5Elevance Health announced its definitive agreement to acquire Amerigroup Corporation for approximately $4.9 billion, aiming to enhance its capabilities in serving the Medicaid population.
  • 6Total medical membership declined slightly by 1.9% to 33.5 million members, with decreases in Local Group and National Accounts partially offset by growth in Senior and State-Sponsored segments.
  • 7Cost of care trend for the Local Group fully-insured business was estimated at 7.0% for the twelve months ended June 30, 2012.

Frequently Asked Questions

The primary driver for the decrease in net income was the impact of non-tax deductible litigation settlement costs, which increased general and administrative expenses and income tax expense. These costs were partially offset by higher operating gains in the Consumer and Commercial segments.

The announced acquisition of Amerigroup Corporation for approximately $4.9 billion is a significant strategic move for Elevance Health. It aims to expand the company's capabilities in serving the growing Medicaid population and other vulnerable populations, aligning with the company's goal of creating better healthcare quality at more affordable prices.

Total medical membership saw a slight decrease of 1.9% to 33.5 million members. This was primarily due to declines in Local Group and National Accounts membership, which were partially offset by increases in Senior and State-Sponsored membership segments.

The acquisition of 1-800 CONTACTS, completed in June 2012, is expected to diversify Elevance Health's revenue stream into the complementary and higher-margin eyewear business. Its results are included in the consolidated financial statements from the acquisition date, and it contributed to an increase in 'Other revenue' as reported in the consolidated statements of income.