10-QPeriod: Q1 FY2013

Elevance Health, Inc. Quarterly Report for Q1 Ended Mar 31, 2013

Filed April 24, 2013For Securities:ELV

Summary

Elevance Health, Inc. (formerly WellPoint, Inc.) reported solid financial performance for the first quarter ended March 31, 2013. Total revenues grew by 14.7% to $17.7 billion, driven by a significant increase in operating revenue, largely attributable to the acquisition of Amerigroup in December 2012, alongside organic growth in premium revenue. Net income saw a modest increase of 3.4% to $885.2 million, resulting in diluted earnings per share (EPS) of $2.89, a 14.2% increase year-over-year. This EPS growth was bolstered by a reduction in outstanding shares due to the company's active share repurchase program. Operational highlights include strong growth in the Consumer segment, largely fueled by the Amerigroup acquisition, while the Commercial segment experienced a slight revenue dip due to strategic product adjustments and market pressures. The company maintained a solid benefit expense ratio and demonstrated improved efficiency with a lower selling, general, and administrative expense ratio. Despite a decrease in operating cash flow compared to the prior year, primarily due to timing of government payments, the company's liquidity remains strong, supported by significant cash and investments. Investors should note the company's continued focus on capital allocation through dividends and share repurchases, as well as ongoing efforts to manage healthcare cost trends.

Financial Highlights

52 data points
Beta

Revenue

$17.58B

99.6% Gross Margin

Net Income

$885.20M

5.0% Net Margin

EPS (Diluted)

$2.89

Total Assets

$59.41B

Cash & Equivalents

$1.66B

Free Cash Flow

$849.40M

Financial Statements
Beta
Revenue$17.58B
Cost of Revenue$65.00M
Gross Profit$17.51B
SG&A Expenses$2.33B
Operating Income$1.36B
Interest Expense$153.50M
Net Income$885.20M
EPS (Basic)$2.92
EPS (Diluted)$2.89
Shares Outstanding (Basic)303.20M
Shares Outstanding (Diluted)305.90M

Key Highlights

  • 1Total revenues increased by 14.7% to $17.7 billion, driven by strong operating revenue growth.
  • 2Net income rose 3.4% to $885.2 million, with diluted EPS growing 14.2% to $2.89.
  • 3The acquisition of Amerigroup significantly contributed to the 51.5% increase in operating revenue for the Consumer segment.
  • 4Operating cash flow decreased by $266.2 million to $956.9 million, mainly due to timing of government premium payments.
  • 5The company's benefit expense ratio remained stable at 83.7%, and the SG&A expense ratio improved to 13.5%.
  • 6Shareholders benefited from a 14.2% increase in dividends per share ($0.3750 in Q1 2013 vs. $0.2875 in Q1 2012).
  • 7Total medical membership increased by 6.3% to 35.8 million, largely due to the Amerigroup acquisition adding state-sponsored members.

Frequently Asked Questions

The primary driver of revenue growth was the acquisition of Amerigroup in December 2012, which significantly boosted operating revenue, particularly in the Consumer segment. Increased premium rates in the Local Group business and revenues from 1-800 CONTACTS also contributed.

The Amerigroup acquisition was a key factor in the substantial increase in operating revenue for the Consumer segment, leading to overall company revenue growth. It also contributed to the increase in total medical membership, particularly in state-sponsored programs. However, it also led to increased interest expense and amortization of intangible assets, impacting overall profitability.

The company estimates a 2013 cost of care trend of 7.0% plus or minus 50 basis points. They are actively managing these trends through contracting strategies, plan design changes, clinical management initiatives, and partnerships with providers to improve quality and lower costs.

Elevance Health (WellPoint) is actively managing its capital through share repurchases and dividend payments. In the first quarter of 2013, the company repurchased approximately $340.2 million of its common stock and paid $113.4 million in dividends. The company also aims to maintain its senior debt investment grade ratings.