10-QPeriod: Q3 FY2015

Elevance Health, Inc. Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 28, 2015For Securities:ELV

Summary

Elevance Health, Inc. (ELV) reported its third-quarter 2015 financial results, showing robust top-line growth and a notable increase in net income. Total operating revenue for the quarter reached $19.8 billion, a 7.6% increase year-over-year, driven by higher premium revenues, particularly in the Government Business segment, and increased administrative fees. Net income rose by 3.8% to $654.8 million, or $2.43 per diluted share, up from $2.22 in the prior year's comparable period. This earnings per share (EPS) growth was supported by both increased net income and a reduction in outstanding shares. The company also highlighted significant progress in its strategic initiatives, including the acquisition of Simply Healthcare and the announcement of its pending merger with Cigna Corporation, which is expected to significantly scale the business. Despite a notable cyber attack in early 2015, the company's operational and financial performance remained strong, demonstrating resilience. Investors should note the continued growth in membership, particularly in government programs, and the company's effective management of cost trends.

Financial Highlights

51 data points
Beta

Revenue

$19.90B

Net Income

$654.80M

3.3% Net Margin

EPS (Diluted)

$2.43

Total Assets

$62.34B

Cash & Equivalents

$1.55B

Free Cash Flow

$164.80M

Financial Statements
Beta
Revenue$19.90B
SG&A Expenses$3.08B
Operating Income$1.22B
Interest Expense$164.80M
Net Income$654.80M
EPS (Basic)$2.51
EPS (Diluted)$2.43
Shares Outstanding (Basic)261.30M
Shares Outstanding (Diluted)269.20M

Key Highlights

  • 1Total operating revenue increased by 7.6% to $19.8 billion for the third quarter of 2015, compared to the same period in 2014.
  • 2Net income grew by 3.8% to $654.8 million, or $2.43 per diluted share, up from $2.22 in Q3 2014.
  • 3The Government Business segment showed strong performance with a 20.8% increase in operating revenue, driven by Medicaid and Medicare membership growth.
  • 4The company announced a pending merger with Cigna Corporation, valued at approximately $53 billion, to create a larger, more diversified health benefits company.
  • 5Elevance Health completed the acquisition of Simply Healthcare in February 2015, strengthening its position in the Government Business segment.
  • 6Operational cash flow for the first nine months of 2015 increased by $102.7 million to $3.17 billion.
  • 7The company's medical membership increased by 3.1% to 38.7 million members as of September 30, 2015, primarily driven by Medicaid and National Accounts.

Frequently Asked Questions

The primary driver of revenue growth was an increase in premium revenue, particularly within the Government Business segment, supported by membership growth in Medicaid and Medicare programs, as well as rate increases designed to cover cost trends and the Health Insurance Provider Fee. Increased administrative fees also contributed to the revenue growth.

The merger agreement with Cigna was announced on July 24, 2015, with an estimated transaction value of $53 billion. The acquisition is expected to close in the second half of 2016, subject to regulatory approvals, shareholder approvals, and other customary closing conditions. The combined entity aims to be a premier health benefits company.

Elevance Health focused on managing cost trends through contracting and plan design changes, promoting performance-based contracts, and expanding disease and advanced care management programs. Initiatives like the Enhanced Personal Health Care program and specific clinical management programs for inpatient and outpatient costs were in place to mitigate cost pressures. While medical utilization was lower, provider rate increases and high-cost specialty drugs remained key drivers of cost trends.

The company reported a sophisticated external cyber attack in February 2015. While the attack led to unauthorized access of certain IT systems and personal information, management stated that there was no evidence that credit card or medical information was accessed. The company incurred expenses for remediation and has stated that the cyber attack did not have an impact on business, cash flows, financial condition, or results of operations for the period reported, though future expenses are expected.