10-QPeriod: Q3 FY2013

Elevance Health, Inc. Quarterly Report for Q3 Ended Sep 30, 2013

Filed October 23, 2013For Securities:ELV

Summary

Elevance Health, Inc. (formerly WellPoint, Inc.) reported a mixed financial performance for the nine months ended September 30, 2013. Total operating revenue saw a significant increase of 16.3% to $52.9 billion, driven by higher premium revenues, particularly from the acquisition of Amerigroup and growth in government business segments. However, net income for the same period decreased slightly by 5.1% to $656.2 million for the third quarter, attributed to increased project costs related to healthcare reform implementation and losses on debt extinguishment, despite improved operating results in government business and lower income tax expenses. Despite the slight dip in quarterly net income, diluted Earnings Per Share (EPS) showed a positive trend, increasing by 16.0% for the nine-month period to $7.69, largely due to share repurchase activities reducing outstanding shares. The company also demonstrated strong operating cash flow, increasing by approximately $795 million year-over-year, signaling robust operational performance and financial health. The company's balance sheet remains substantial with over $60 billion in total assets, though it is managing a significant debt load, with a debt-to-capital ratio slightly above its target range.

Financial Highlights

53 data points
Beta

Revenue

$17.86B

99.6% Gross Margin

Net Income

$656.20M

3.7% Net Margin

EPS (Diluted)

$2.16

Total Assets

$60.26B

Cash & Equivalents

$2.18B

Free Cash Flow

$1.24B

Financial Statements
Beta
Revenue$17.86B
Cost of Revenue$68.60M
Gross Profit$17.79B
SG&A Expenses$2.54B
Operating Income$1.00B
Interest Expense$151.50M
Net Income$656.20M
EPS (Basic)$2.21
EPS (Diluted)$2.16
Shares Outstanding (Basic)297.40M
Shares Outstanding (Diluted)304.50M

Key Highlights

  • 1Total operating revenue increased by 16.3% to $52.9 billion for the nine months ended September 30, 2013, primarily driven by the Amerigroup acquisition and growth in government business.
  • 2Net income for the third quarter decreased by 5.1% to $656.2 million, mainly due to project costs for healthcare reform and debt extinguishment losses.
  • 3Diluted Earnings Per Share (EPS) increased by 16.0% to $7.69 for the nine-month period, aided by share repurchases.
  • 4Operating cash flow increased significantly by $794.7 million to $2.8 billion for the nine months ended September 30, 2013.
  • 5The company experienced a substantial increase in its Government Business segment revenue (47.6% for the quarter and 46.5% for the nine months), largely due to the Amerigroup acquisition.
  • 6Commercial and Specialty Business operating gain decreased by 19.3% for the quarter, primarily due to higher selling, general and administrative expenses related to healthcare reform preparations.
  • 7The company's debt-to-capital ratio was 37.5% at September 30, 2013, slightly above its target range of 25-35%, influenced by debt incurred for the Amerigroup acquisition.

Frequently Asked Questions

The primary driver for the significant increase in revenue, particularly in the Government Business segment, was the acquisition of Amerigroup in December 2012. Premium rate increases in various business lines and growth in the FEP business also contributed to the revenue uplift.

The decrease in net income for the third quarter was primarily attributed to higher project costs incurred in preparation for the implementation of healthcare reform, along with realized losses on the extinguishment of debt. These factors offset the improved operating results in the Government Business segment and lower income tax expense.

Elevance Health actively engaged in share repurchase programs. The company repurchased a significant amount of its common stock during the period, which reduced the number of outstanding shares. This reduction in share count was a key factor in the strong increase in diluted Earnings Per Share (EPS), despite fluctuations in net income.

The company's debt-to-capital ratio stood at 37.5% as of September 30, 2013, which is slightly above its targeted range of 25% to 35%. This elevated ratio is primarily due to debt incurred to finance the Amerigroup acquisition. Management expects to return to the targeted levels over time. The company also maintains investment-grade debt ratings, indicating a generally stable financial position.