10-QPeriod: Q2 FY2013

Elevance Health, Inc. Quarterly Report for Q2 Ended Jun 30, 2013

Filed July 24, 2013For Securities:ELV

Summary

Elevance Health (formerly WellPoint) reported a strong second quarter of 2013, demonstrating significant revenue growth and improved net income compared to the prior year. Total operating revenue increased by 16.0% to $17.6 billion, primarily driven by the acquisition of Amerigroup and premium rate increases in its Government and Commercial businesses. Net income saw a substantial increase of 24.3% to $800.1 million, resulting in a diluted EPS of $2.64, up from $1.94 in the prior year period. This growth was fueled by higher operating results across both government and commercial segments, despite increased interest expenses related to the Amerigroup acquisition. The company continues to manage its capital effectively through share repurchases and dividend payments, indicating a focus on shareholder returns while investing in growth. Key financial strengths include a robust operating revenue increase supported by strategic acquisitions and pricing adjustments. The company also managed to improve its net income and EPS, showcasing operational efficiency. Despite a decrease in net investment income, the overall financial performance highlights the company's resilience and ability to navigate market dynamics. Investors can take comfort in the positive growth trajectory and the company's commitment to shareholder value, though ongoing integration costs and market pressures remain factors to monitor.

Financial Highlights

53 data points
Beta

Revenue

$17.69B

99.6% Gross Margin

Net Income

$800.10M

4.5% Net Margin

EPS (Diluted)

$2.64

Total Assets

$59.61B

Cash & Equivalents

$1.34B

Free Cash Flow

$283.20M

Financial Statements
Beta
Revenue$17.69B
Cost of Revenue$62.40M
Gross Profit$17.63B
SG&A Expenses$2.44B
Operating Income$1.22B
Interest Expense$151.90M
Net Income$800.10M
EPS (Basic)$2.67
EPS (Diluted)$2.64
Shares Outstanding (Basic)299.50M
Shares Outstanding (Diluted)303.20M

Key Highlights

  • 1Total operating revenue increased 16.0% year-over-year to $17.6 billion.
  • 2Net income rose 24.3% to $800.1 million.
  • 3Diluted Earnings Per Share (EPS) increased to $2.64 from $1.94 in the prior year quarter.
  • 4The Government Business segment saw significant revenue growth (45.6%) driven by the Amerigroup acquisition.
  • 5Commercial and Specialty Business revenue saw a slight decrease of 0.3%, but operating gain increased by 8.1% due to improved medical cost management.
  • 6The company repurchased approximately 3.7 million shares of common stock for $275.3 million during the quarter.
  • 7Consolidated debt-to-capital ratio was 37.7% at June 30, 2013, slightly above the target range, primarily due to financing the Amerigroup acquisition.

Frequently Asked Questions

The primary drivers for the 16.0% increase in total operating revenue were higher premium revenues, largely due to the acquisition of Amerigroup in December 2012, and premium rate increases in both the Government and Commercial businesses. The 1-800 CONTACTS business also contributed to increased 'other revenue'.

The acquisition of Amerigroup significantly boosted the Government Business segment's revenue by 45.6%. While it also contributed to increased interest expenses due to higher debt levels, the overall impact on net income and EPS was positive, demonstrating successful integration and contribution to earnings.

The company regularly reviews its capital allocation strategy, including share repurchases and dividend payments. During the quarter, the Board of Directors' authorization allowed for repurchases, and the company repurchased approximately 3.7 million shares of common stock. Dividends per share increased to $0.3750 in Q2 2013 from $0.2875 in Q2 2012, indicating a commitment to returning capital to shareholders.

The company is involved in various legal proceedings, including class action lawsuits related to out-of-network reimbursement and other matters. While the company contests liability, it has established reserves for probable losses and estimates a range of possible losses in excess of established reserves from $0 to approximately $350.0 million at June 30, 2013. Investors should monitor developments in these litigations as they could materially affect financial position or results of operations.