10-QPeriod: Q2 FY2019

Elevance Health, Inc. Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 24, 2019For Securities:ELV

Summary

Elevance Health, Inc. (ELV) reported a solid financial performance for the quarter ending June 30, 2019. Total operating revenue saw a significant increase of 10.8% year-over-year, reaching $25.18 billion. This growth was primarily driven by higher premium revenues, reflecting both membership increases and strategic rate adjustments across its Government Business and Commercial & Specialty Business segments. Net income also showed a healthy increase of 8.1% to $1.14 billion, supported by improved operational performance and a substantial reduction in income tax expense due to the suspension of the Health Insurance Provider (HIP) Fee. The company's membership base continued to expand, with total medical membership growing by 3.3% year-over-year. This growth was particularly strong in the Government Business segment, driven by Medicaid and Medicare programs. Elevance Health also announced a significant strategic move with the agreement to acquire Beacon Health Options, Inc., a major behavioral health organization, signaling a continued focus on expanding its health services capabilities. Overall, the results demonstrate Elevance Health's ability to drive revenue growth, manage costs effectively, and expand its market reach. The company's strategic initiatives, including the anticipated acquisition and its PBM services through IngenioRx, position it for continued expansion and value creation for its shareholders. Investors should monitor the integration of Beacon Health Options and the ongoing performance of its key business segments, particularly the Government Business, which showed robust growth.

Financial Highlights

52 data points
Beta

Revenue

$25.47B

99.6% Gross Margin

Net Income

$1.14B

4.5% Net Margin

EPS (Diluted)

$4.36

Total Assets

$75.85B

Cash & Equivalents

$4.08B

Free Cash Flow

$1.22B

Financial Statements
Beta
Revenue$25.47B
Cost of Revenue$98.00M
Gross Profit$25.37B
SG&A Expenses$3.28B
Operating Income$1.43B
Interest Expense$184.00M
Net Income$1.14B
EPS (Basic)$4.44
EPS (Diluted)$4.36
Shares Outstanding (Basic)256.70M
Shares Outstanding (Diluted)261.00M

Key Highlights

  • 1Total operating revenue increased by 10.8% year-over-year to $25.18 billion, driven by premium revenue growth in both Government and Commercial & Specialty segments.
  • 2Net income rose by 8.1% to $1.14 billion, benefiting from lower income tax expenses due to the suspension of the HIP Fee.
  • 3Total medical membership grew by 3.3% to 40.85 million, with notable strength in the Government Business segment (Medicaid and Medicare).
  • 4The company announced an agreement to acquire Beacon Health Options, Inc., a significant step in expanding its behavioral health services.
  • 5Benefit expense increased by 14.9% to $20.37 billion, primarily due to membership growth and higher medical cost experience in the Medicaid business.
  • 6Selling, general, and administrative expenses decreased by 4.4% to $3.28 billion, largely due to the suspension of the HIP Fee.
  • 7Diluted Earnings Per Share (EPS) increased by 9.5% to $4.36, reflecting improved net income and a reduced share count.

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 attributed to membership increases and rate adjustments designed to cover overall cost trends and medical cost experience. The suspension of the Health Insurance Provider (HIP) Fee also had an impact, though overall revenue grew substantially.

Total medical membership increased by 3.3% year-over-year, reaching 40.85 million members. The Government Business segment saw significant growth, particularly in Medicaid and Medicare. Fully-insured membership also saw an increase, largely driven by growth in these government programs.

The announced agreement to acquire Beacon Health Options, Inc., a large behavioral health organization, signifies Elevance Health's strategic intent to diversify into health services and enhance its integrated care delivery models, particularly for individuals with complex and chronic conditions. This acquisition is expected to close in the fourth quarter of 2019.

The suspension of the HIP Fee for 2019 significantly reduced income tax expense and selling, general, and administrative expenses compared to the prior year. While it led to a decrease in revenue related to the fee itself, the overall impact was positive for net income and profitability metrics due to the corresponding reduction in expenses and taxes.