10-QPeriod: Q1 FY2017

Elevance Health, Inc. Quarterly Report for Q1 Ended Mar 31, 2017

Filed April 26, 2017For Securities:ELV

Summary

Elevance Health, Inc. (formerly Anthem, Inc.) reported strong financial performance for the first quarter of 2017, with operating revenue increasing by 9.9% year-over-year to $22.3 billion and net income rising by 43.7% to $1.01 billion. This growth was driven by higher premium revenues across its commercial and government segments, reflecting rate increases and membership expansion, particularly in Medicaid and Local Group offerings. The company also benefited from a suspension of the Health Insurance Provider (HIP) Fee for 2017, which reduced expenses and income tax obligations. Despite robust revenue and net income growth, investors should note the ongoing significant legal and regulatory challenges. The company is heavily involved in litigation concerning its proposed acquisition of Cigna Corporation, with a pending appellate decision after a district court ruled against the merger. Additionally, Anthem is facing other substantial legal actions, including a major antitrust lawsuit involving Blue Cross Blue Shield licensees and a significant lawsuit against its pharmacy benefit manager, Express Scripts, over pricing disputes. While the company reported increased operating cash flow and a solid liquidity position, these ongoing legal matters and the inherent complexities of the healthcare industry present notable risks to future performance.

Financial Highlights

51 data points
Beta

Revenue

$22.52B

Net Income

$1.01B

4.5% Net Margin

EPS (Diluted)

$3.73

Total Assets

$68.94B

Cash & Equivalents

$6.77B

Free Cash Flow

$2.56B

Financial Statements
Beta
Revenue$22.52B
SG&A Expenses$3.19B
Operating Income$1.59B
Interest Expense$235.00M
Net Income$1.01B
EPS (Basic)$3.82
EPS (Diluted)$3.73
Shares Outstanding (Basic)264.40M
Shares Outstanding (Diluted)270.40M

Key Highlights

  • 1Operating revenue increased by 9.9% to $22.3 billion for the three months ended March 31, 2017, compared to the prior year period, driven by higher premium revenue and administrative fees.
  • 2Net income saw a substantial increase of 43.7% to $1.01 billion, or $3.73 per diluted share, compared to the first quarter of 2016.
  • 3Medical membership grew by 2.6% to 40.6 million members, primarily due to increases in Medicaid and Local Group membership.
  • 4The company's operating cash flow more than doubled, increasing by $1.3 billion to $2.69 billion for the first quarter of 2017.
  • 5The Health Insurance Provider (HIP) Fee was suspended for 2017, contributing to lower benefit expenses and income tax expense.
  • 6The company's pending acquisition of Cigna Corporation faces significant legal and regulatory challenges, with an appellate court decision still pending after a district court ruling against the merger.
  • 7Elevance Health is actively involved in multiple significant legal proceedings, including a major antitrust lawsuit and a dispute with its pharmacy benefit manager, Express Scripts.

Frequently Asked Questions

Elevance Health reported a strong first quarter in 2017, with operating revenue up 9.9% to $22.3 billion and net income up 43.7% to $1.01 billion ($3.73 diluted EPS). This growth was primarily driven by higher premium revenue from membership increases and rate adjustments, as well as a beneficial suspension of the Health Insurance Provider (HIP) Fee.

The primary risks highlighted include the ongoing legal and regulatory battles surrounding the pending acquisition of Cigna Corporation, which has faced adverse court rulings and appeals. Additionally, the company is involved in significant litigation with its pharmacy benefit manager, Express Scripts, concerning pricing disputes, and faces a broad antitrust lawsuit related to Blue Cross Blue Shield operations. There is also the inherent uncertainty and complexity of the healthcare industry and regulatory environment, including potential changes to the Affordable Care Act.

Total medical membership increased by 2.6% to 40.6 million as of March 31, 2017. This growth was largely fueled by increases in Medicaid and Local Group membership, alongside smaller gains in Medicare and BlueCard business, partially offset by slight declines in Individual and National Accounts.

The proposed acquisition of Cigna is facing significant hurdles. While the company is appealing a district court ruling that sought to block the merger, the appellate court's decision is still pending. Cigna has also attempted to terminate the merger agreement, leading to ongoing litigation between the two companies. The completion of the acquisition remains uncertain.