10-QPeriod: Q3 FY2016

Elevance Health, Inc. Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 2, 2016For Securities:ELV

Summary

Elevance Health, Inc. (ELV) reported solid revenue growth for the nine months ended September 30, 2016, with total operating revenue increasing by 7.4% year-over-year to $62.7 billion. This growth was primarily driven by higher premium revenues, particularly in the Government Business segment, and increased administrative fees. However, net income saw a decline of 11.7% for the same period, reaching $2.1 billion. This decrease was influenced by higher benefit expenses due to increased medical costs and membership growth, as well as costs associated with the pending acquisition of Cigna Corporation and increased interest expenses. The company also experienced a decrease in net income for the third quarter of 2016 compared to the prior year, reflecting similar pressures from rising benefit expenses and acquisition-related costs. Despite the dip in net income, the company's medical membership grew by 3.1% year-over-year, driven by strong performance in Medicaid and National Accounts. Investors should note the ongoing regulatory scrutiny and litigation surrounding the proposed Cigna acquisition, which could impact future strategic decisions and financial performance.

Financial Highlights

51 data points
Beta

Revenue

$21.40B

Net Income

$617.80M

2.9% Net Margin

EPS (Diluted)

$2.30

Total Assets

$64.40B

Cash & Equivalents

$2.55B

Free Cash Flow

$799.60M

Financial Statements
Beta
Revenue$21.40B
SG&A Expenses$3.12B
Operating Income$1.08B
Interest Expense$172.90M
Net Income$617.80M
EPS (Basic)$2.35
EPS (Diluted)$2.30
Shares Outstanding (Basic)263.20M
Shares Outstanding (Diluted)268.10M

Key Highlights

  • 1Total operating revenue increased by 7.4% to $62.7 billion for the nine months ended September 30, 2016, compared to the same period in 2015.
  • 2Net income decreased by 11.7% to $2.1 billion for the nine months ended September 30, 2016.
  • 3Medical membership grew by 3.1% to 39.9 million members as of September 30, 2016.
  • 4Benefit expense increased by 10.0% for the nine months ended September 30, 2016, driven by higher medical costs and membership growth.
  • 5The company is actively defending against a DOJ lawsuit seeking to block its proposed acquisition of Cigna Corporation, with trial expected to commence in November 2016.
  • 6Selling, general and administrative expenses remained relatively flat for the nine-month period, indicating disciplined cost management.
  • 7The company reported a decrease in diluted earnings per share (EPS) to $7.84 for the nine months ended September 30, 2016, down from $8.66 in the prior year.

Frequently Asked Questions

Elevance Health announced an Agreement and Plan of Merger with Cigna Corporation on July 24, 2015. However, the U.S. Department of Justice (DOJ) filed a civil antitrust lawsuit on July 21, 2016, seeking to block the acquisition. A trial is expected to commence on November 21, 2016. Elevance Health intends to vigorously defend the acquisition and remains committed to completing it as soon as practicable, with a closing date initially set for January 31, 2017, extendable to April 30, 2017.

For the nine months ended September 30, 2016, total operating revenue increased by 7.4% to $62.7 billion, driven by higher premium revenues and administrative fees. However, net income decreased by 11.7% to $2.1 billion, primarily due to increased benefit expenses, costs associated with the pending Cigna acquisition, and higher interest expenses.

The company experienced a 3.1% increase in total medical membership, reaching 39.9 million members as of September 30, 2016. Key drivers of this growth were increases in Medicaid, National Accounts, BlueCard®, and Local Group membership.

Yes, the most significant is the ongoing DOJ lawsuit to block the Cigna acquisition. Additionally, the company is involved in several other class-action lawsuits related to out-of-network reimbursement and antitrust allegations concerning Blue Cross and Blue Shield licensees. A previously reported cyber attack in February 2015 is also leading to ongoing investigations and potential claims.