Full Press Release Details
ANTHEM REPORTS FOURTH QUARTER AND FULL YEAR 2020 RESULTS
Indianapolis, Ind. January 27, 2021 Anthem, Inc. (NYSE: ANTM) reported fourth quarter 2020 results that reflected solid performance across the enterprise.
Despite uncertainties with the pandemic, Anthem delivered strong growth across all of our businesses in 2020 reflecting the diversity and strength of our portfolio and our unwavering commitment to those we serve, said Gail K. Boudreaux, President and CEO, Anthem, Inc. I am proud of all that we accomplished during this challenging time, and we remain focused on supporting our members, customers and communities as a trusted health partner.
As part of Anthem s efforts to combat the global pandemic, address health inequities, and adapt to the ever-changing healthcare environment, the Company has remained focused on fostering deeper relationships and developing innovative solutions to meet critical needs for its stakeholders. Actions taken during 2020 to support our members, customers, care providers and local communities include:
Care for our Anthem associates
Care for our consumers, customers, and providers
Care for our communities
Partnering with Lyft to provide transportation for at-risk communities to support universal access to the COVID-19 vaccine, with the goal of 60 million rides.
Additional actions to support society
CONSOLIDATED HIGHLIGHTS
Earnings Per Share: GAAP net income was $2.19 per share in the fourth quarter, including net negative adjustment items of $0.35 per share. Adjusted net income was $2.54* per share. Full year GAAP net income was $17.98 per share, including net negative adjustment items of $4.50 per share. Adjusted net income was $22.48* per share.
Membership: Medical enrollment totaled approximately 42.9 million members at December 31, 2020, an increase of 1.9 million lives, or 4.7 percent from December 31, 2019. Total risk enrollment grew by 1.7 million lives, or 11 percent, and fee-based enrollment grew by 211 thousand lives, or 0.8 percent. Government Business enrollment increased by 1.9 million lives compared to the prior year, attributable to Medicaid, reflecting organic growth as a result of the temporary suspension of eligibility recertification efforts in our markets as well as our acquisition of the Medicaid plans in Missouri and Nebraska, and growth in Medicare Advantage. Commercial & Specialty Business enrollment increased by 67 thousand lives driven by the acquisition of AmeriBen and growth in our National business, partially offset by higher in-group change as a result of the economic environment.
During the fourth quarter of 2020, medical enrollment increased sequentially by 300 thousand lives, reflecting organic growth in Medicaid and Medicare businesses as well as sales exceeding lapses in our Local Group business, partially offset by in-group change in the National business.
Operating Revenue: Operating revenue was $31.5 billion in the fourth quarter of 2020, an increase of $4.4 billion, or 16.2 percent, versus the prior year quarter, driven by higher premium revenue due to growth in Medicaid and Medicare. The increase was further attributable to pharmacy product revenue related to IngenioRx and the return of the health insurance tax in 2020.
Benefit Expense Ratio: The benefit expense ratio was 88.9 percent in the fourth quarter of 2020, a decrease of 10 basis point from 89.0 percent compared to the prior year quarter. The decrease was driven by reduced non-COVID healthcare utilization due to the pandemic, and to a lesser extent, the return of the health insurance tax in 2020. Taken together, the decrease was largely offset by costs associated with COVID-19, including testing and treatment and the actions taken to support our members in response to the pandemic.
Medical claims reserves established at December 31, 2019 developed in line with the Company s expectations during 2020.
Days in Claims Payable: Days in Claims Payable was 43.4 days as of December 31, 2020, an increase of 2.3 days from September 30, 2020 and an increase of 5.4 days as compared to December 31, 2019.
SG&A Expense Ratio: The SG&A expense ratio was 13.7 percent in the fourth quarter of 2020, an increase of 80 basis points from 12.9 percent in the fourth quarter of 2019, primarily driven by the return of the health insurance tax in 2020 and increased spend to support growth, partially offset by growth in operating revenue.
Operating Cash Flow: Operating cash flow was $3.8 billion in the fourth quarter of 2020, an increase of $2.5 billion compared to the prior year quarter. The increase was primarily due to the timing of working capital changes, including the early receipt of certain payments that were originally expected to be received in 2021, and growth in premium revenue due to the return of the health insurance tax in 2020 as well as membership growth in our Government business.
Share Repurchase Program : During the fourth quarter of 2020, the Company repurchased 4.4 million shares of its common stock for $1.4 billion, or a weighted average price of $305.66. For the full year, the Company repurchased 9.4 million shares for $2.7 billion, or a weighted average price of $286.35. As of December 31, 2020, the Company had approximately $1.1 billion remaining of Board-approved share repurchase authorization. On January 26, 2021, our Audit Committee, pursuant to authorization granted by the Board of Directors, authorized a $5.0 billion increase to the common stock repurchase program. The Company intends to utilize this authorization over a multi-year period, subject to market and industry conditions.
Cash Dividend: During the fourth quarter of 2020, the Company paid a quarterly dividend of $0.95 per share, representing a distribution of cash totaling $234 million.
On January 26, 2021, the Audit Committee declared a first quarter 2021 dividend to shareholders of $1.13 per share. On an annualized basis, this equates to a dividend of $4.52 per share. The first quarter dividend is payable on March 25, 2021 to shareholders of record at the close of business on March 10, 2021.
Investment Portfolio & Capital Position: During the fourth quarter of 2020, the Company recorded net realized gains of $5 million. During the fourth quarter of 2019, the Company recorded net realized gains of $7 million.
As of December 31, 2020, the Company s net unrealized gain position in the investment portfolio was $1.2 billion, consisting primarily of fixed maturity securities. As of December 31, 2020 cash and investments at the parent company totaled approximately $1.7 billion.
REPORTABLE SEGMENTS
Effective January 1, 2020, Anthem, Inc. has four reportable segments: Commercial & Specialty Business (comprised of the Local Group, National Accounts, Individual and Specialty businesses); Government Business (comprised of the Medicaid, Medicare, and Federal Health Products & Services businesses); IngenioRx, and Other (comprised of the Diversified Business Group and corporate expenses not allocated to our other reportable segments).
| Anthem, Inc. | ||||||||||||||||||||||||
| Reportable Segment Highlights | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| (In millions) | Three Months Ended December 31 | Twelve Months Ended December 31 | ||||||||||||||||||||||
| 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||
| Operating Revenue | ||||||||||||||||||||||||
| Commercial & Specialty Business | $ | 9,223 | $ | 9,328 | (1.1 | )% | $ | 36,699 | $ | 37,421 | (1.9 | )% | ||||||||||||
| Government Business | 18,763 | 16,213 | 15.7 | % | 71,572 | 62,632 | 14.3 | % | ||||||||||||||||
| IngenioRx | 5,863 | 3,232 | 81.4 | % | 21,911 | 5,402 | 305.6 | % | ||||||||||||||||
| Other | 1,780 | 613 | 190.4 | % | 6,057 | 2,293 | 164.2 | % | ||||||||||||||||
| Eliminations | (4,096 | ) | (2,254 | ) | NM | 2 | (15,431 | ) | (4,607 | ) | NM | 2 | ||||||||||||
| Total Operating Revenue 1 | $ | 31,533 | $ | 27,132 | 16.2 | % | $ | 120,808 | $ | 103,141 | 17.1 | % | ||||||||||||
| Operating Gain / (Loss) 3 | ||||||||||||||||||||||||
| Commercial & Specialty Business | $ | 123 | $ | 527 | (76.7 | )% | $ | 2,681 | $ | 4,032 | (33.5 | )% | ||||||||||||
| Government Business | 169 | 586 | (71.2 | )% | 2,444 | 2,056 | 18.9 | % | ||||||||||||||||
| IngenioRx | 363 | NM | 2 | 1,361 | NM | 2 | ||||||||||||||||||
| Other | (50 | ) | (15 | ) | NM | 2 | (126 | ) | (89 | ) | NM | 2 | ||||||||||||
| Total Operating Gain 1 | $ | 605 | $ | 1,098 | (44.9 | )% | $ | 6,360 | $ | 5,999 | 6.0 | % | ||||||||||||
| Operating Margin | ||||||||||||||||||||||||
| Commercial & Specialty Business | 1.3 | % | 5.6 | % | (430 | ) bp | 7.3 | % | 10.8 | % | (350 | ) bp | ||||||||||||
| Government Business | 0.9 | % | 3.6 | % | (270 | ) bp | 3.4 | % | 3.3 | % | 10 bp | |||||||||||||
| IngenioRx | 6.2 | % | NM | 2 | 6.2 | % | % | NM | 2 | |||||||||||||||
| Total Operating Margin 1 | 1.9 | % | 4.0 | % | (210 | ) bp | 5.3 | % | 5.8 | % | (50 | ) bp |
Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled $123 million in the fourth quarter of 2020, a decrease of $404 million from an operating gain of $527 million in the fourth quarter of 2019. The decrease was primarily attributable to costs associated with COVID-19, including testing and treatment and the actions taken to support our members in response to the pandemic, partially offset by reduced non-COVID healthcare utilization. Additionally, the decline was driven by the shift of pharmacy earnings to the IngenioRx segment.
Government Business: Operating gain in the Government Business segment was $169 million in the fourth quarter of 2020, a decrease of $417 million, or 71.2 percent, from $586 million in the fourth quarter of 2019. The decrease was primarily driven by costs associated with COVID-19, including testing and treatment and the actions taken to support our members in response to the pandemic, partially offset by reduced non-COVID healthcare utilization. The decline was further attributable to the shift of pharmacy earnings to the IngenioRx segment, retroactive rate adjustments in Medicaid, and increased spend to support growth.
IngenioRx: IngenioRx commenced operations in the second quarter of 2019 and the transition of membership was completed on January 1, 2020. Operating gain was $363 million in the fourth quarter of 2020. Calendar year 2020 represented the first full year of operations for IngenioRx.
Other: The Company reported an operating loss of $50 million in the Other segment for the fourth quarter of 2020, compared with an operating loss of $15 million in the prior year quarter.
Full Year 2021:
Basis of Presentation
Conference Call and Webcast
Management will host a conference call and webcast today at 8:30 a.m. Eastern Standard Time ( EST ) to discuss the company s fourth 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:
| 888-947-9963 (Domestic) | 888-566-0512 (Domestic Replay) | |
| 312-470-0178 (International) | 203-369-3061 (International Replay) |
The access code for today s conference call is 2583196 . The replay will be available from 11:30 a.m. EST today, until the end of the day on February 26, 2021. 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 | Michelle Vanstory | |
| Chris.Rigg@anthem.com | Michelle.Vanstory@anthem.com |
About Anthem, Inc.
Anthem is a leading health benefits company dedicated to improving lives and communities, and making healthcare simpler. Through its affiliated companies, Anthem serves more than 110 million people, including approximately 43 million within its family of health plans. We aim to be the most innovative, valuable and inclusive partner. For more information, please visit www.antheminc.com or follow @AnthemInc on Twitter.
Membership Summary
(Unaudited and in Thousands)
| Change from | ||||||||||||||||||||
| Medical Membership | December 31, 2020 | December 31, 2019 | September 30, 2020 | December 31, 2019 | September 30, 2020 | |||||||||||||||
| Customer Type | ||||||||||||||||||||
| Local Group | 15,614 | 15,682 | 15,509 | (0.4 | )% | 0.7 | % | |||||||||||||
| Individual | 680 | 684 | 701 | (0.6 | )% | (3.0 | )% | |||||||||||||
| National: | ||||||||||||||||||||
| National Accounts | 7,736 | 7,596 | 7,773 | 1.8 | % | (0.5 | )% | |||||||||||||
| BlueCard | 6,059 | 6,060 | 6,106 | % | (0.8 | )% | ||||||||||||||
| Total National | 13,795 | 13,656 | 13,879 | 1.0 | % | (0.6 | )% | |||||||||||||
| Medicare: | ||||||||||||||||||||
| Medicare Advantage | 1,428 | 1,214 | 1,416 | 17.6 | % | 0.8 | % | |||||||||||||
| Medicare Supplement | 933 | 905 | 933 | 3.1 | % | % | ||||||||||||||
| Total Medicare | 2,361 | 2,119 | 2,349 | 11.4 | % | 0.5 | % | |||||||||||||
| Medicaid | 8,852 | 7,265 | 8,569 | 21.8 | % | 3.3 | % | |||||||||||||
| Federal Employees Health Benefits | 1,623 | 1,594 | 1,618 | 1.8 | % | 0.3 | % | |||||||||||||
| Total Medical Membership | 42,925 | 41,000 | 42,625 | 4.7 | % | 0.7 | % | |||||||||||||
| Funding Arrangement | ||||||||||||||||||||
| Self-Funded | 25,629 | 25,418 | 25,633 | 0.8 | % | % | ||||||||||||||
| Fully-Insured | 17,296 | 15,582 | 16,992 | 11.0 | % | 1.8 | % | |||||||||||||
| Total Medical Membership | 42,925 | 41,000 | 42,625 | 4.7 | % | 0.7 | % | |||||||||||||
| Reportable Segment | ||||||||||||||||||||
| Commercial & Specialty Business | 30,089 | 30,022 | 30,089 | 0.2 | % | % | ||||||||||||||
| Government Business | 12,836 | 10,978 | 12,536 | 16.9 | % | 2.4 | % | |||||||||||||
| Total Medical Membership | 42,925 | 41,000 | 42,625 | 4.7 | % | 0.7 | % | |||||||||||||
| Other Membership | ||||||||||||||||||||
| Life and Disability Members | 5,064 | 5,259 | 5,029 | (3.7 | )% | 0.7 | % | |||||||||||||
| Dental Members | 6,385 | 6,263 | 6,356 | 1.9 | % | 0.5 | % | |||||||||||||
| Dental Administration Members | 1,316 | 5,516 | 1,315 | (76.1 | )% | 0.1 | % | |||||||||||||
| Vision Members | 7,536 | 7,261 | 7,487 | 3.8 | % | 0.7 | % | |||||||||||||
| Medicare Part D Standalone Members | 413 | 283 | 405 | 45.9 | % | 2.0 | % |
Consolidated Statements of Income
| (In millions, except per share data) | Three Months Ended December 31 | |||||||||||
| 2020 | 2019 | Change | ||||||||||
| Revenues | ||||||||||||
| Premiums | $ | 27,108 | $ | 24,036 | 12.8 | % | ||||||
| Product revenue | 2,899 | 1,500 | 93.3 | % | ||||||||
| Administrative fees and other revenue | 1,526 | 1,596 | (4.4 | )% | ||||||||
| Total operating revenue | 31,533 | 27,132 | 16.2 | % | ||||||||
| Net investment income | 286 | 268 | 6.7 | % | ||||||||
| Net realized gains on financial instruments | 5 | 7 | NM | |||||||||
| Total revenues | 31,824 | 27,407 | 16.1 | % | ||||||||
| Expenses | ||||||||||||
| Benefit expense | 24,088 | 21,383 | 12.7 | % | ||||||||
| Cost of products sold | 2,522 | 1,149 | 119.5 | % | ||||||||
| Selling, general and administrative expense | 4,318 | 3,502 | 23.3 | % | ||||||||
| Interest expense | 191 | 190 | 0.5 | % | ||||||||
| Amortization of other intangible assets | 92 | 82 | 12.2 | % | ||||||||
| Loss on extinguishment of debt | 2 | 3 | NM | |||||||||
| Total expenses | 31,213 | 26,309 | 18.6 | % | ||||||||
| Income before income tax expense | 611 | 1,098 | (44.4 | )% | ||||||||
| Income tax expense | 60 | 164 | (63.4 | )% | ||||||||
| Net income | $ | 551 | $ | 934 | (41.0 | )% | ||||||
| Net income per diluted share | $ | 2.19 | $ | 3.62 | (39.5 | )% | ||||||
| Diluted shares | 251.1 | 258.0 | (2.7 | )% | ||||||||
| Benefit expense as a percentage of premiums | 88.9 | % | 89.0 | % | (10 | )bp | ||||||
| Selling, general and administrative expense as a percentage of total operating revenue | 13.7 | % | 12.9 | % | 80 | bp | ||||||
| Income before income taxes as a percentage of total revenue | 1.9 | % | 4.0 | % | (210 | )bp |
NM = calculation not meaningful
Consolidated Statements of Income
| (In millions, except per share data) | Twelve Months Ended December 31 | |||||||||||
| 2020 | 2019 | Change | ||||||||||
| Revenues | ||||||||||||
| Premiums | $ | 104,109 | $ | 94,173 | 10.6 | % | ||||||
| Product revenue | 10,384 | 2,760 | 276.2 | % | ||||||||
| Administrative fees and other revenue | 6,315 | 6,208 | 1.7 | % | ||||||||
| Total operating revenue | 120,808 | 103,141 | 17.1 | % | ||||||||
| Net investment income | 877 | 1,005 | (12.7 | )% | ||||||||
| Net realized gains on financial instruments | 182 | 67 | 171.6 | % | ||||||||
| Total revenues | 121,867 | 104,213 | 16.9 | % | ||||||||
| Expenses | ||||||||||||
| Benefit expense | 88,045 | 81,786 | 7.7 | % | ||||||||
| Cost of products sold | 8,953 | 1,992 | 349.4 | % | ||||||||
| Selling, general and administrative expense | 17,450 | 13,364 | 30.6 | % | ||||||||
| Interest expense | 784 | 746 | 5.1 | % | ||||||||
| Amortization of other intangible assets | 361 | 338 | 6.8 | % | ||||||||
| Loss on extinguishment of debt | 36 | 2 | NM | |||||||||
| Total expenses | 115,629 | 98,228 | 17.7 | % | ||||||||
| Income before income tax expense | 6,238 | 5,985 | 4.2 | % | ||||||||
| Income tax expense | 1,666 | 1,178 | 41.4 | % | ||||||||
| Net income | $ | 4,572 | $ | 4,807 | (4.9 | )% | ||||||
| Net income per diluted share | $ | 17.98 | $ | 18.47 | (2.7 | )% | ||||||
| Diluted shares | 254.3 | 260.3 | (2.3 | )% | ||||||||
| Benefit expense as a percentage of premiums | 84.6 | % | 86.8 | % | (220 | )bp | ||||||
| Selling, general and administrative expense as a percentage of total operating revenue | 14.4 | % | 13.0 | % | 140 | bp | ||||||
| Income before income taxes as a percentage of total revenue | 5.1 | % | 5.7 | % | (60 | )bp |
NM = calculation not meaningful
Consolidated Balance Sheets
| (In millions) | December 31, 2020 | December 31, 2019 | ||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,741 | $ | 4,937 | ||||
| Fixed maturity securities, current (amortized cost of $22,222 and $19,021; allowance for credit losses of $7 and $0) | 23,433 | 19,676 | ||||||
| Equity securities, current | 1,559 | 1,009 | ||||||
| Premium receivables | 5,279 | 5,014 | ||||||
| Self-funded receivables | 2,849 | 2,570 | ||||||
| Other receivables | 2,830 | 2,807 | ||||||
| Other current assets | 4,060 | 3,020 | ||||||
| Total current assets | 45,751 | 39,033 | ||||||
| Long-term investments: | ||||||||
| Fixed maturity securities (amortized cost of $532 and $487; allowance for credit losses of $0 and $0) | 562 | 505 | ||||||
| Other invested assets | 4,285 | 4,258 | ||||||
| Property and equipment, net | 3,483 | 3,133 | ||||||
| Goodwill | 21,691 | 20,500 | ||||||
| Other intangible assets | 9,405 | 8,674 | ||||||
| Other noncurrent assets | 1,438 | 1,350 | ||||||
| Total assets | $ | 86,615 | $ | 77,453 | ||||
| Liabilities and shareholders equity | ||||||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Medical claims payable | $ | 11,359 | $ | 8,842 | ||||
| Other policyholder liabilities | 4,590 | 3,050 | ||||||
| Unearned income | 1,259 | 1,017 | ||||||
| Accounts payable and accrued expenses | 5,493 | 4,198 | ||||||
| Short-term borrowings | 700 | |||||||
| Current portion of long-term debt | 700 | 1,598 | ||||||
| Other current liabilities | 6,052 | 4,127 | ||||||
| Total current liabilities | 29,453 | 23,532 | ||||||
| Long-term debt, less current portion | 19,335 | 17,787 | ||||||
| Reserves for future policy benefits | 794 | 759 | ||||||
| Deferred tax liabilities, net | 2,019 | 2,227 | ||||||
| Other noncurrent liabilities | 1,815 | 1,420 | ||||||
| Total liabilities | 53,416 | 45,725 | ||||||
| Shareholders equity | ||||||||
| Common stock | 3 | 3 | ||||||
| Additional paid-in capital | 9,244 | 9,448 | ||||||
| Retained earnings | 23,802 | 22,573 | ||||||
| Accumulated other comprehensive income (loss) | 150 | (296 | ) | |||||
| Total shareholders equity | 33,199 | 31,728 | ||||||
| Total liabilities and shareholders equity | $ | 86,615 | $ | 77,453 |
Consolidated Statements of Cash Flows
| (In millions) | Twelve Months Ended December 31 | |||||||
| 2020 | 2019 | |||||||
| Operating activities | ||||||||
| Net income | $ | 4,572 | $ | 4,807 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Net realized gains on financial instruments | (182 | ) | (67 | ) | ||||
| Depreciation and amortization | 1,154 | 1,133 | ||||||
| Deferred income taxes | (540 | ) | 81 | |||||
| Impairment of property and equipment | 198 | |||||||
| Share-based compensation | 283 | 294 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables, net | (256 | ) | (1,053 | ) | ||||
| Other invested assets | (32 | ) | (48 | ) | ||||
| Other assets | (283 | ) | (170 | ) | ||||
| Policy liabilities | 3,528 | 1,826 | ||||||
| Unearned income | 202 | 115 | ||||||
| Accounts payable and other liabilities | 1,978 | (445 | ) | |||||
| Income taxes | 72 | (325 | ) | |||||
| Other, net | (6 | ) | (87 | ) | ||||
| Net cash provided by operating activities | 10,688 | 6,061 | ||||||
| Investing activities | ||||||||
| Purchases of investments | (19,492 | ) | (22,954 | ) | ||||
| Proceeds from sale of investments | 11,318 | 18,598 | ||||||
| Maturities, calls and redemptions from investments | 4,741 | 2,437 | ||||||
| Changes in securities lending collateral | (849 | ) | 254 | |||||
| Purchases of subsidiaries, net of cash acquired | (1,976 | ) | ||||||
| Purchases of property and equipment | (1,021 | ) | (1,077 | ) | ||||
| Other, net | (45 | ) | (50 | ) | ||||
| Net cash used in investing activities | (7,324 | ) | (2,792 | ) | ||||
| Financing activities | ||||||||
| Net repayments of commercial paper borrowings | (150 | ) | (297 | ) | ||||
| Net repayments of short-term borrowings | (700 | ) | (445 | ) | ||||
| Net proceeds from long-term borrowings | 552 | 1,350 | ||||||
| Changes in securities lending payable | 849 | (254 | ) | |||||
| Repurchase and retirement of common stock | (2,700 | ) | (1,701 | ) | ||||
| Cash dividends | (954 | ) | (818 | ) | ||||
| Proceeds from issuance of common stock under employee stock plans | 176 | 187 | ||||||
| Taxes paid through withholding of common stock under employee stock plans | (128 | ) | (84 | ) | ||||
| Other, net | 488 | (204 | ) | |||||
| Net cash used in financing activities | (2,567 | ) | (2,266 | ) | ||||
| Effect of foreign exchange rates on cash and cash equivalents | 7 | |||||||
| Change in cash and cash equivalents | 804 | 1,003 | ||||||
| Cash and cash equivalents at beginning of period | 4,937 | 3,934 | ||||||
| Cash and cash equivalents at end of period | $ | 5,741 | $ | 4,937 |
Reconciliation of Medical Claims Payable
| Years Ended December 31 | ||||||||||||
| 2020 | 2019 | 2018 | ||||||||||
| (In millions) | (Unaudited) | |||||||||||
| Gross medical claims payable, beginning of year | $ | 8,647 | $ | 7,266 | $ | 7,814 | ||||||
| Ceded medical claims payable, beginning of year | (33 | ) | (34 | ) | (105 | ) | ||||||
| Net medical claims payable, beginning of year | 8,614 | 7,232 | 7,709 | |||||||||
| Business combinations and purchase adjustments | 339 | 199 | ||||||||||
| Net incurred medical claims: | ||||||||||||
| Current year | 85,094 | 78,695 | 69,581 | |||||||||
| Prior years redundancies (1) | (637 | ) | (500 | ) | (930 | ) | ||||||
| Total net incurred medical claims | 84,457 | 78,195 | 68,651 | |||||||||
| Net payments attributable to: | ||||||||||||
| Current year medical claims | 74,629 | 70,294 | 62,748 | |||||||||
| Prior years medical claims | 7,692 | 6,519 | 6,579 | |||||||||
| Total net payments | 82,321 | 76,813 | 69,327 | |||||||||
| Net medical claims payable, end of year | 11,089 | 8,614 | 7,232 | |||||||||
| Ceded medical claims payable, end of year | 46 | 33 | 34 | |||||||||
| Gross medical claims payable, end of year* | $ | 11,135 | $ | 8,647 | $ | 7,266 | ||||||
| Current year medical claims paid as a percentage of current year net incurred medical claims | 87.7 | % | 89.3 | % | 90.2 | % | ||||||
| Prior year redundancies in the current year as a percentage of prior year net medical claims payable less prior year redundancies in the current year | 8.0 | % | 7.4 | % | 13.7 | % | ||||||
| Prior year redundancies in the current year as a percentage of prior year net incurred medical claims | 0.8 | % | 0.7 | % | 1.3 | % |
GAAP Reconciliation
Anthem, Inc. has referenced Adjusted Net Income and Adjusted Net Income Per Share, which are non-GAAP measures, in this document. These non-GAAP measures are not intended to be alternatives to any measure calculated in accordance with GAAP. In addition to these non-GAAP measures, references are made to the measures Operating Revenue and Operating Gain. Each of these measures is provided to further aid investors in understanding and analyzing the company s core operating results and comparing Anthem, Inc. s financial results. A reconciliation of Operating Revenue to Total Revenue is set forth in the Consolidated Statements of Income herein. A reconciliation of the non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP, together with a reconciliation of reportable segments operating gain to income before income tax expense, is reported below. Prior amounts may be grouped differently to conform to current presentation.
| Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||||||||||
| (In millions, except per share data) | 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||||||||||||
| Net income | $ | 551 | $ | 934 | (41.0 | )% | $ | 4,572 | $ | 4,807 | (4.9 | )% | ||||||||||||
| Add / (Subtract): | ||||||||||||||||||||||||
| Net realized gains on financial instruments | (5 | ) | (7 | ) | (182 | ) | (67 | ) | ||||||||||||||||
| Amortization of other intangible assets | 92 | 82 | 361 | 338 | ||||||||||||||||||||
| Loss on extinguishment of debt | 2 | 3 | 36 | 2 | ||||||||||||||||||||
| Business optimization charges | 46 | 653 | ||||||||||||||||||||||
| BCBSA litigation settlement | (46 | ) | 548 | |||||||||||||||||||||
| Transaction and integration related costs | 22 | 3 | 49 | 11 | ||||||||||||||||||||
| Litigation expenses | 6 | 8 | 40 | 52 | ||||||||||||||||||||
| Tax impact of non-GAAP adjustments | (31 | ) | (23 | ) | (360 | ) | (84 | ) | ||||||||||||||||
| Net adjustment items | 86 | 66 | 1,145 | 252 | ||||||||||||||||||||
| Adjusted net income | $ | 637 | $ | 1,000 | (36.3 | )% | $ | 5,717 | $ | 5,059 | 13.0 | % | ||||||||||||
| Net income per diluted share | $ | 2.19 | $ | 3.62 | (39.5 | )% | $ | 17.98 | $ | 18.47 | (2.7 | )% | ||||||||||||
| Add / (Subtract): | ||||||||||||||||||||||||
| Net realized gains on financial instruments | (0.02 | ) | (0.02 | ) | (0.72 | ) | (0.26 | ) | ||||||||||||||||
| Amortization of other intangible assets | 0.37 | 0.32 | 1.42 | 1.30 | ||||||||||||||||||||
| Loss on extinguishment of debt | 0.01 | 0.01 | 0.14 | 0.01 | ||||||||||||||||||||
| Business optimization charges | 0.18 | 2.57 | ||||||||||||||||||||||
| BCBSA litigation settlement | (0.18 | ) | 2.15 | |||||||||||||||||||||
| Transaction and integration related costs | 0.09 | 0.01 | 0.19 | 0.04 | ||||||||||||||||||||
| Litigation expenses | 0.02 | 0.03 | 0.16 | 0.20 | ||||||||||||||||||||
| Tax impact of non-GAAP adjustments | (0.12 | ) | (0.09 | ) | (1.42 | ) | (0.32 | ) | ||||||||||||||||
| Rounding impact | 0.01 | |||||||||||||||||||||||
| Net adjustment items | 0.35 | 0.26 | 4.50 | 0.97 | ||||||||||||||||||||
| Adjusted net income per diluted share | $ | 2.54 | $ | 3.88 | (34.5 | )% | $ | 22.48 | $ | 19.44 | 15.6 | % | ||||||||||||
| Full Year 2021 Outlook | ||||||||||||||||||||||||
| Net income per diluted share | Greater than $23.51 | |||||||||||||||||||||||
| Add / (Subtract): | ||||||||||||||||||||||||
| Amortization of other intangible assets | Approximately $1.31 | |||||||||||||||||||||||
| Tax impact of non-GAAP adjustments | Approximately $(0.32) | |||||||||||||||||||||||
| Net adjustment items | Approximately $0.99 | |||||||||||||||||||||||
| Adjusted net income per diluted share | Greater than $24.50 | |||||||||||||||||||||||
| Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||||||||||||
| (In millions) | 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||||||||||||
| Reportable segments operating gain | $ | 605 | $ | 1,098 | (44.9 | )% | $ | 6,360 | $ | 5,999 | 6.0 | % | ||||||||||||
| Net investment income | 286 | 268 | 877 | 1,005 | ||||||||||||||||||||
| Net realized gains on financial instruments | 5 | 7 | 182 | 67 | ||||||||||||||||||||
| Interest expense | (191 | ) | (190 | ) | (784 | ) | (746 | ) | ||||||||||||||||
| Amortization of other intangible assets | (92 | ) | (82 | ) | (361 | ) | (338 | ) | ||||||||||||||||
| Loss on extinguishment of debt | (2 | ) | (3 | ) | (36 | ) | (2 | ) | ||||||||||||||||
| Income before income tax expense | $ | 611 | $ | 1,098 | (44.4 | )% | $ | 6,238 | $ | 5,985 | 4.2 | % |
Financial Guidance Summary
| Full Year 2020 Actual | Full Year 2021 Outlook | Approximate Change | ||||||||||
| Year-End Medical Enrollment | ||||||||||||
| Self-funded | 25,629 | 25,500 - 25,700 | (129k) - 71k | |||||||||
| Fully-Insured | 17,296 | 18,600 - 19,000 | 1,304k - 1,704k | |||||||||
| Total | 42,925 | 44,100 - 44,700 | 1,175k - 1,775k | |||||||||
| Operating Revenue | $120.8 billion | $135.1 billion | Approximately $14.3 billion or 11.8% | |||||||||
| Premium Revenue | $104.1 billion | $114.5 - $115.5 billion | $10.4 - $11.4 billion or 10.0 - 10.9% | |||||||||
| Benefit Expense Ratio | 84.6% | 88.0% +/- 50 bps | 340 bps +/- 50 bps | |||||||||
| SG&A Expense Ratio | 14.4% | 10.8% +/- 50 bps | (360) bps +/- 50 bps | |||||||||
| Operating Gain | $6.4 billion | Greater than $7.5 billion | Greater than $1.1 billion or 17.2% | |||||||||
| Other Pre-Tax Items: | ||||||||||||
| Net Investment income | $877 million | $940 million | $63 million | |||||||||
| Interest Expense | ($784) million | ($785) million | ($1) million | |||||||||
| Amortization of Intangible Assets | ($361) million | ($324) million | $37 million | |||||||||
| Net Pre-Tax Expense | ($268) million | ($169) million | $99 million | |||||||||
| Effective Tax Rate | 26.7% | 20.0% - 22.0% | (6.7%) - (4.7%) | |||||||||
| GAAP EPS | $17.98 | Greater than $23.51 | 30.8% or better | |||||||||
| Adjusted EPS | $22.48 | Greater than $24.50 | 9.0% or better | |||||||||
| Diluted Shares | 254.3 million | 246 - 248 million | (3.3%) - (2.5%) | |||||||||
| Operating Cash Flow | $10.7 billion | Greater than $5.7 billion | ($5.0) billion or better |
Forward-Looking Statements
This document contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our views about future events and financial performance and are generally not historical facts. Words such as expect, feel, believe, will, may, should, anticipate, intend, estimate, project, forecast, plan and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to: financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking statements. You are cautioned not to place undue reliance on these forward- looking statements that speak only as of the date hereof. You are also urged to carefully review and consider the various risks and other disclosures discussed in our reports filed with the U.S. Securities and Exchange Commission from time to time, which attempt to advise interested parties of the factors that affect our business. Except to the extent otherwise required by federal securities laws, we do not undertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof. These risks and uncertainties include, but are not limited to: the impact of large scale medical emergencies, such as public health epidemics and pandemics, including COVID-19, and catastrophes; trends in healthcare costs and utilization rates; our ability to secure sufficient premium rates, including regulatory approval for and implementation of such rates; the impact of federal and state regulation, including ongoing changes in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the ACA ) and the ultimate outcome of legal challenges to the ACA; changes in economic and market conditions, as well as regulations that may negatively affect our liquidity and investment portfolios; our ability to contract with providers on cost-effective and competitive terms; competitive pressures and our ability to adapt to changes in the industry and develop and implement strategic growth opportunities; reduced enrollment; unauthorized disclosure of member or employee sensitive or confidential information, including the impact and outcome of any investigations, inquiries, claims and litigation related thereto; risks and uncertainties regarding Medicare and Medicaid programs, including those related to non-compliance with the complex regulations imposed thereon; our ability to maintain and achieve improvement in Centers for Medicare and Medicaid Services, or CMS Star ratings and other quality scores and funding risks with respect to revenue received from participation therein; a negative change in our healthcare product mix; costs and other liabilities associated with litigation, government investigations, audits or reviews; the ultimate outcome of litigation between Cigna Corporation and us related to the merger agreement between the parties and the potential for such litigation to cause us to incur substantial additional costs, including potential settlement and judgment costs; risks and uncertainties related to our pharmacy benefit management ( PBM ) business including non-compliance by any party with the PBM services agreement between us and CaremarkPCS Health, L.L.C.; medical malpractice or professional liability claims or other risks related to healthcare and PBM services provided by our subsidiaries; general risks associated with mergers, acquisitions, joint ventures and strategic alliances; possible impairment of the value of our intangible assets if future results do not adequately support goodwill and other intangible assets; possible restrictions in the payment of dividends from our subsidiaries and increases in required minimum levels of capital; our ability to repurchase shares of our common stock and pay dividends on our common stock due to the adequacy of our cash flow and earnings and other considerations; the potential negative effect from our substantial amount of outstanding indebtedness; a downgrade in our financial strength ratings; the effects of any negative publicity related to the health benefits industry in general or us in particular; failure to effectively maintain and modernize our information systems; events that may negatively affect our licenses with the Blue Cross and Blue Shield Association; the impact of international laws and regulations; changes in U.S. tax laws; intense competition to attract and retain employees; and various laws and provisions in our governing documents that may prevent or discourage takeovers and business combinations.