Full Press Release Details
ANTHEM REPORTS FIRST QUARTER 2018 RESULTS
REFLECTING STRONG MEDICAL COST PERFORMANCE
Indianapolis, Ind. April 25, 2018 Anthem, Inc. (NYSE: ANTM) reported strong first quarter 2018 financial results and improved margins while continuing to make strategic investments in growth initiatives.
We are pleased with our first quarter 2018 financial performance, which reflects our commitment to strong medical cost performance by effectively leveraging community based innovative and integrated clinical and value based care models across our markets, said Gail K. Boudreaux, President and CEO. Throughout 2018, we are prioritizing investments to create a more flexible infrastructure that can quickly respond to the evolving needs of our customers and the changing healthcare environment. We are also driving an increased focus on executional excellence across the organization. I see further opportunity for Anthem as we continue to unlock the full potential of our company to deliver consistently strong financial performance and future growth.
Based on first quarter results and the business outlook for the remainder of the year, Anthem has increased its outlook for 2018 adjusted net earnings to be greater than $15.30* per share.
CONSOLIDATED HIGHLIGHTS
Membership: Medical enrollment totaled approximately 39.6 million members at March 31, 2018, a decrease of 1.0 million members, or 2.5% percent, from 40.6 million at March 31, 2017. The enrollment decrease was driven predominantly by a reduced footprint in the Individual ACA-compliant marketplace. Enrollment gains in fee-based services were partially offset by declines in Local Group insured membership. Medicaid enrollment declined by 120,000 individuals while Medicare grew by 237,000 lives.
Medical enrollment declined by 616 thousand lives sequentially during the first quarter of 2018. The decrease reflected enrollment declines in the Individual and Local Group fully-insured businesses, partially offset by growth in the National, Medicare, and BlueCard businesses.
Operating Revenue: Operating revenue was $22.3 billion in the first quarter of 2018, flat compared to the $22.3 billion in the prior year quarter. The results reflected premium rate increases to cover overall cost trends across our business as well as the return of the health insurance tax in 2018. Revenues also increased due to the acquisitions of Health Sun and America s 1st Choice as well as organic membership growth in the Medicare business. These increases were offset by a reduced footprint in the Individual ACA-compliant marketplace and membership declines in the Local Group fully-insured and Medicaid businesses.
Benefit Expense Ratio: The benefit expense ratio was 81.5 percent in the first quarter of 2018, a decrease of 220 basis points from 83.7 percent in the prior year quarter. The decrease was primarily driven by the return of the health insurance tax in 2018 and improved medical cost performance across our business segments.
Medical claims reserves established at December 31, 2017 developed moderately better than the Company s expectation during the first quarter of 2018.
Medical Cost Trend: For the full year 2018, the Company continues to expect underlying Local Group medical cost trend to be in the range of 6.0% +/- 50 basis points.
Days in Claims Payable: Days in Claims Payable ( DCP ) was 40.3 days as of March 31, 2018, an increase of 0.9 days from 39.4 days as of December 31, 2017.
SG&A Expense Ratio: The SG&A expense ratio was 15.3 percent in the first quarter of 2018, an increase of 100 basis points from 14.3 percent in the first quarter of 2017. The increase, as expected, was primarily driven by the return of the health insurance tax in 2018 as well as the impact of increased investment spend in 2018 to support growth initiatives. The increase was partially offset by the Penn Treaty assessments that were recorded in the first quarter of 2017 and lower administrative spend from expense efficiency initiatives.
Operating Cash Flow: Operating cash flow was $2.2 billion, or 1.7 times net income in the first quarter of 2018. For the first quarter of 2017, operating cash flow was $2.7 billion, or 2.7 times net income.
Share Repurchase Program : During the first quarter of 2018, the Company repurchased 1.7 million shares of its common stock for $395 million, or a weighted-average price of $233.51. As of March 31, 2018, the Company had approximately $6.8 billion of Board-approved share repurchase authorization remaining.
Cash Dividend: During the first quarter of 2018, the Company paid a quarterly dividend of $0.75 per share, representing a distribution of cash totaling $191.9 million.
On April 24, 2018, the Audit Committee declared a second quarter 2018 dividend to shareholders of $0.75 per share. On an annualized basis, this equates to a dividend of $3.00 per share. The second quarter dividend is payable on June 25, 2018 to shareholders of record at the close of business on June 8, 2018.
Investment Portfolio & Capital Position: During the first quarter of 2018, the Company recorded net realized losses on financial instruments totaling $26.1 million and other-than-temporary impairment losses totaling $7.9 million. During the first quarter of 2017, the Company recorded net realized gains of $7.3 million and other-than-temporary impairment losses totaling $8.1 million.
As of March 31, 2018, the Company s net unrealized gain position in the investment portfolio was $18.7 million, consisting entirely of fixed maturity securities. The adoption of a change in accounting standards has resulted in the Company accounting for changes in the value of equity securities in realized gains or losses. As of March 31, 2018 cash and investments at the parent company totaled approximately $1.1 billion.
REPORTABLE SEGMENTS
Anthem, Inc. has three reportable segments: Commercial & Specialty Business (comprised of the Local Group, National Accounts, Individual and Specialty businesses); Government Business (comprised of the Medicaid and Medicare businesses, National Government Services, and the Federal Employee Program); and Other (comprised of unallocated corporate expenses and certain other businesses that do not meet the quantitative thresholds for separate reportable segment disclosure).
| Anthem, Inc. | ||||||||||||
| Reportable Segment Highlights | ||||||||||||
| (Unaudited) | ||||||||||||
| (In millions) | Three Months Ended March 31 | |||||||||||
| 2018 | 2017 | Change | ||||||||||
| Operating Revenue | ||||||||||||
| Commercial & Specialty Business | $ | 9,066.4 | $ | 10,289.6 | (11.9 | )% | ||||||
| Government Business | 13,262.4 | 12,025.7 | 10.3 | % | ||||||||
| Other | 13.5 | 4.2 | 221.4 | % | ||||||||
| Total Operating Revenue 1 | 22,342.3 | 22,319.5 | 0.1 | % | ||||||||
| Operating Gain / (Loss) | ||||||||||||
| Commercial & Specialty Business | $ | 1,408.4 | $ | 1,302.4 | 8.1 | % | ||||||
| Government Business | 490.9 | 318.6 | 54.1 | % | ||||||||
| Other | (31.4 | ) | (35.6 | ) | NM | 2 | ||||||
| Total Operating Gain 1 | 1,867.9 | 1,585.4 | 17.8 | % | ||||||||
| Operating Margin | ||||||||||||
| Commercial & Specialty Business | 15.5 | % | 12.7 | % | 280 bp | |||||||
| Government Business | 3.7 | % | 2.6 | % | 110 bp | |||||||
| Total Operating Margin 1 | 8.4 | % | 7.1 | % | 130 bp |
Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled $1,408.4 million in the first quarter of 2018, an increase of $106.0 million, or 8.1 percent, from $1,302.4 million in the first quarter of 2017. The increase was primarily driven by the Penn Treaty assessments that were recorded in the first quarter of 2017 and improved medical cost performance. The increase was partially offset by a reduced footprint in the Individual ACA-compliant marketplace and increased investment spend to support our growth initiatives.
Government Business: Operating gain in the Government Business segment was $490.9 million in the first quarter of 2018, an increase of $172.3 million, or 54.1 percent, from $318.6 million in the first quarter of 2017. The increase reflects the impact of the HealthSun and America s 1st Choice acquisitions as well as organic membership increases in the Medicare business, and retroactive revenue adjustments in the Medicaid business. The increase was partially offset by increased investment spend to support our growth initiatives.
Other: The Company reported an operating loss of $31.4 million in the Other segment for the first quarter of 2018, compared with an operating loss of $35.6 million in the prior year quarter.
Full Year 2018:
Basis of Presentation
Conference Call and Webcast
Management will host a conference call and webcast today at 8:30 a.m. Eastern Daylight Time ( EDT ) to discuss the company s first quarter results and outlook. The conference call should be accessed at least 15 minutes prior to the start of the call with the following numbers:
| 877-209-9920 (Domestic) | 800-475-6701 (Domestic Replay) | |
| 612-332-0932 (International) | 320-365-3844 (International Replay) |
An access code is not required for today s conference call. The access code for the replay is 432033. The replay will be available from 11:00 a.m. EDT today, until the end of the day on May 9, 2018. The call will also be available through a live webcast at www.antheminc.com under the Investors link. A webcast replay will be available following the call.
| Anthem Contacts: | ||
| Investor Relations | Media | |
| Chris Rigg, 317-488-6887 | Jill Becher, 414-234-1573 | |
| Chris.rigg@anthem.com | Jill.becher@anthem.com |
About Anthem, Inc.
Anthem is working to transform health care with trusted and caring solutions. Our health plan companies deliver quality products and services that give their members access to the care they need. With over 74 million people served by its affiliated companies, including nearly 40 million within its family of health plans, Anthem is one of the nation s leading health benefits companies. For more information about Anthem s family of companies, please visit www.antheminc.com/companies .
Anthem, Inc. Membership Summary (Unaudited and in Thousands) Change from March 31, 2018 March 31, 2017 December 31, 2017 March 31, 2017 December 31, 2017 Medical Membership
National Accounts
Total Medical Membership
Funding Arrangement
Total Medical Membership
Reportable Segment
Commercial & Specialty Business
Government Business
Total Medical Membership
Other Membership
Life and Disability Members
Dental Administration Members
Medicare Advantage Part D Members
Medicare Part D Standalone Members
Anthem, Inc. Consolidated Statements of Income (Unaudited) (In millions, except per share data) Three Months Ended March 31 2018 2017 Change Revenues
Administrative fees
Total operating revenue
Net investment income
Net realized gains/(losses) on financial instruments
Other-than-temporary impairment losses on investments:
Total other-than-temporary impairment losses on investments
Portion of other-than-temporary impairment losses recognized in other comprehensive income
Other-than-temporary impairment losses recognized in income
Benefit expense
Selling, general and administrative expense:
Selling expense
General and administrative expense
Total selling, general and administrative expense
Interest expense
Amortization of other intangible assets
Loss on extinguishment of debt
Income before income tax expense
Income tax expense
Net income per diluted share
Benefit expense as a percentage of premiums
Selling, general and administrative expense as a percentage of total operating revenue
Income before income taxes as a percentage of total revenue
Anthem, Inc. Consolidated Balance Sheets (In millions) March 31, 2018 December 31, 2017 (Unaudited) Assets
Current assets:
Cash and cash equivalents
Fixed maturity securities
Equity securities
Other invested assets, current
Accrued investment income
Premium and self-funded receivables