Indianapolis-based Anthem Inc. (NYSE: ANTM) is reporting first quarter net income of $865.2 million, compared to $701 million during the same period the previous year. Chief Executive Officer Joe Swedish says growing membership fueled a “solid start” to 2015.

April 29, 2015

News Release

Indianapolis, Ind. — Anthem, Inc. (NYSE: ANTM) today announced that first quarter 2015 net income was $865.2 million, or $3.09 per share. These results included net losses of $0.05 per share. Net income in the first quarter of 2014 was $701.0 million, or $2.40 per share, which included net losses of $0.02 per share.

Excluding the items noted in each period, adjusted net income was $3.14 per share in the first quarter of 2015, an increase of 29.8 percent compared with adjusted net income of $2.42 per share in the prior year quarter (refer to GAAP reconciliation table for a reconciliation to the most directly comparable measure calculated in accordance with U.S. generally accepted accounting principles, or “GAAP”).

“We are pleased to report a solid start to 2015 and an increase in our earnings outlook for the full year. First quarter results reflect our growing membership base as we continue to focus on improving affordability for our members. We are encouraged with how our strategy is playing out and believe it positions us to capitalize on multiple growth opportunities across our businesses,” said Joseph Swedish, president and chief executive officer.

“First quarter results position us well for the remainder of 2015 and highlight another quarter of consistent execution. During the quarter, we continued our capital deployment strategy, closing the Simply Healthcare acquisition and returning $941 million to our shareholders through share repurchases and stockholder dividends,” said Wayne DeVeydt, executive vice president and chief financial officer.

CONSOLIDATED HIGHLIGHTS

Membership: Medical enrollment totaled approximately 38.5 million members at March 31, 2015, an increase of approximately 1.0 million members, or 2.8 percent, from 37.5 million at December 31, 2014. Commercial & Specialty Business enrollment increased by 555,000 medical members as the Company experienced growth in the National, Individual, and Local Group markets. Enrollment also grew in the Medicaid, Federal Employee Program, and Medicare business by 429,000, 32,000, and 22,000, respectively.

Operating Revenue: Operating revenue was nearly $18.9 billion in the first quarter of 2015, an increase of approximately $1.2 billion, or 6.8 percent, compared with approximately $17.6 billion in the prior year quarter. The growth in revenue reflected premium increases to cover overall cost trends and increased fees associated with Health Care Reform, as well as higher enrollment in the Medicaid, Commercial self-funded and Individual businesses. These increases were partially offset by a decline in Local Group fully insured enrollment.

Benefit Expense Ratio: The benefit expense ratio was 80.2 percent in the first quarter of 2015, a decrease of 250 basis points from 82.7 percent in the prior year quarter. The decline was largely driven by an improvement in the Local and Individual businesses predominantly due to the timing of medical cost experience, improved medical cost performance in certain markets in the Medicaid business and the impact of an increase in the health insurer fee for 2015.

Medical claims reserves established at December 31, 2014, developed modestly better than the Company’s expectation during the first quarter of 2015.

Medical Cost Trend: For the full year 2015, the Company continues to expect that underlying Local Group medical cost trend will be in the range of 7.0% plus or minus 50 basis points.

Days in Claims Payable: Days in Claims Payable (“DCP”) was 45.7 days as of March 31, 2015, an increase of 3.2 days from 42.5 days as of December 31, 2014. The increase was primarily due to higher reserves associated with new membership coming online throughout the quarter.

SG&A Expense Ratio: The SG&A expense ratio was 16.7 percent in the first quarter of 2015, an increase of 50 basis points from 16.2 percent in the first quarter of 2014. The increase was primarily driven by increased Health Care Reform fees for 2015 and higher administrative costs as a result of strong membership growth during the first quarter of 2015.

Operating Cash Flow: Operating cash flow for the first quarter 2015 was nearly $1.7 billion, or 1.9 times net income, which includes the timing of federal income tax payments as our first and second estimated payments in 2015 are scheduled to occur in the second quarter.

Share Repurchase Program: During the first quarter of 2015, the Company repurchased nearly 5.7 million shares of its common stock for $774 million, or a weighted-average price of $136.88. As of March 31, 2015, the Company had approximately $4.9 billion of Board-approved share repurchase authorization remaining.

Cash Dividend: During the first quarter of 2015, the Company paid a quarterly dividend of $0.625 per share, representing a distribution of cash totaling $166.6 million.

On April 28, 2015, the Audit Committee declared a second quarter 2015 dividend to shareholders of $0.625 per share. On an annualized basis, this equates to a dividend of $2.50 per share. The second quarter dividend is payable on June 25, 2015, to shareholders of record at the close of business on June 10, 2015.

Investment Portfolio & Capital Position: During the first quarter of 2015, the Company recorded net realized gains on investments totaling $46.5 million, partially offset by other-than-temporary impairment losses totaling $14.0 million. During the first quarter of 2014, the Company recorded net realized gains of $41.7 million, partially offset by other-than-temporary impairment losses totaling $10.8 million.

As of March 31, 2015, the Company’s net unrealized gain position in the investment portfolio was $1,063.3 million, consisting of net unrealized gains on equity and fixed maturity securities totaling $586.1 million and $477.2 million, respectively. As of March 31, 2015, cash and investments at the parent company totaled approximately $2.8 billion.

Discontinued Operations: In late December 2013, the Company entered into agreements to divest its 1-800 CONTACTS subsidiary and related assets. The sales were completed on January 31, 2014. As a result, the current and prior period operating results of 1-800 CONTACTS have been classified as discontinued operations, net of the related tax effects.

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).

Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled nearly $1,267.0 million in the first quarter of 2015, an increase of $380.9 million, or 43.0 percent, from $886.1 million in the first quarter of 2014. The increase is a result of a lower benefit expense ratio in the Local Group and Individual businesses due to the timing of medical cost experience and enrollment growth in the National, Individual and Local Group markets.

Government Business: Operating gain in the Government Business segment was $324.4 million in the first quarter of 2015, an increase of $84.8 million, or 35.4 percent, from $239.6 million in the first quarter of 2014. The increase was driven by improved results in the Medicaid business, as a result of enrollment increases and improved medical cost performance in certain markets.

Other: The Company reporte

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