10-QPeriod: Q1 FY2019

Elevance Health, Inc. Quarterly Report for Q1 Ended Mar 31, 2019

Filed April 24, 2019For Securities:ELV

Summary

Elevance Health (ELV), formerly Anthem, Inc., reported a strong first quarter for 2019, with total operating revenue increasing by 9.2% to $24.4 billion compared to the prior year's period. This growth was primarily driven by higher premium revenues in both the Government and Commercial & Specialty businesses, fueled by membership increases and strategic rate adjustments. Net income saw a significant jump of 18.2% to $1.55 billion, resulting in diluted earnings per share of $5.91, up from $4.99 in the same period last year. The company also benefited from the suspension of the Health Insurance Provider (HIP) Fee in 2019, which positively impacted net income and the effective tax rate. Despite a decrease in operating cash flow due to timing differences in Medicare prepayments and the HIP Fee suspension's impact on premium receipts, Elevance Health maintained a robust financial position. The company continued its capital return program through share repurchases and dividend payments, reflecting confidence in its ongoing operational performance and future outlook. Key strategic initiatives, such as the development of its PBM IngenioRx and the integration of the America's 1st Choice acquisition, are progressing, positioning the company for continued growth and market leadership in the healthcare sector.

Financial Highlights

52 data points
Beta

Revenue

$24.67B

100.0% Gross Margin

Net Income

$1.55B

6.3% Net Margin

EPS (Diluted)

$5.91

Total Assets

$74.52B

Cash & Equivalents

$4.48B

Free Cash Flow

$1.40B

Financial Statements
Beta
Revenue$24.67B
Cost of Revenue$0
Gross Profit$24.67B
SG&A Expenses$3.17B
Operating Income$1.94B
Interest Expense$187.00M
Net Income$1.55B
EPS (Basic)$6.03
EPS (Diluted)$5.91
Shares Outstanding (Basic)257.10M
Shares Outstanding (Diluted)262.30M

Key Highlights

  • 1Total operating revenue increased by 9.2% to $24.4 billion for the three months ended March 31, 2019, driven by membership growth and premium rate adjustments.
  • 2Net income rose by 18.2% to $1.55 billion, leading to a diluted EPS of $5.91, an 18.4% increase year-over-year.
  • 3The suspension of the Health Insurance Provider (HIP) Fee in 2019 favorably impacted the company's income tax expense and effective tax rate.
  • 4Medical membership increased by 2.9% to 40.8 million, with significant growth observed in Medicare Advantage and Medicaid programs.
  • 5The company's Commercial & Specialty Business segment showed improved operating gain due to better medical cost performance and higher administrative fees.
  • 6Government Business segment operating gain decreased by 20.4%, impacted by retroactive revenue adjustments and elevated medical costs in certain Medicaid states.
  • 7Operating cash flow decreased by $585 million, primarily due to timing differences in Medicare prepayments received in the prior year and lower premium receipts from the HIP Fee suspension.

Frequently Asked Questions

The increase in operating revenue was primarily driven by higher premium revenues across both the Government Business and Commercial & Specialty Business segments. This growth was a result of increased medical membership, particularly in Medicare and Medicaid programs, and strategic rate increases implemented to cover rising healthcare costs.

The suspension of the HIP Fee for 2019 had a positive impact. It led to a decrease in income tax expense and a lower effective tax rate. Additionally, the company's selling, general and administrative expenses decreased, and its selling, general and administrative expense ratio improved due to the absence of this fee and overall expense management.

While the Government Business segment experienced a decrease in operating gain for the quarter, this was primarily due to retroactive revenue adjustments in Medicaid markets recognized in the prior year and elevated medical costs in certain Medicaid states. Membership growth in Medicare, driven by strong open enrollment sales, and FEP business performance provided some offset. Management is focused on managing medical costs in Medicaid and leveraging growth in Medicare.

Elevance Health is transitioning its PBM services to its newly established PBM, IngenioRx, in partnership with CVS Health. This move aims to provide more cost-effective solutions and better integrate pharmacy benefits with its medical and specialty offerings. The company has terminated its agreement with Express Scripts and is in a transition period.