[July 27, 2016] |
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Anthem Reports Second Quarter 2016 Results
Anthem, Inc. (NYSE: ANTM) today announced that second quarter 2016 net
income was $780.6 million, or $2.91 per share. These results included
net negative adjustment items of $0.42 per share. Net income in the
second quarter of 2015 was $859.1 million, or $3.13 per share, which
included net positive adjustment items of $0.03 per share.
Excluding the items noted in each period, adjusted net income was $3.33
per share in the second quarter of 2016, an increase of 7.4 percent
compared with adjusted net income of $3.10 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").
"Our second quarter results reflect the continued growth and
diversification of our company. Our commitment to the pending Cigna
acquisition remains as strong as ever and we believe this acquisition
will further advance affordability and quality for our customers," said
Joseph Swedish, president and chief executive officer.
"Our second quarter 2016 earnings were in line with our expectations and
reflected contributions from both of our business segments and an
ongoing commitment to administrative expense efficiency," said John
Gallina, executive vice president and chief financial officer.
CONSOLIDATED HIGHLIGHTS
Membership: Medical enrollment totaled approximately 39.8 million
members at June 30, 2016, an increase of approximately 1.2 million
members, or 3.2 percent, from 38.5 million at June 30, 2015. Commercial
& Specialty Business enrollment increased by 654 thousand medical
members as the Company experienced growth in the National and Local
Group business, partially offset by a slight decrease in the Individual
business. Enrollment also grew by 572 thousand in the Medicaid business.
Medical enrollment increased by 148 thousand members, or 0.4 percent,
sequentially during the second quarter of 2016. The increase reflected
enrollment gains in the Medicaid business, partially offset by declines
in the Individual and National businesses.
Operating Revenue: Operating revenue was nearly $21.3 billion in
the second quarter of 2016, an increase of approximately $1.5 billion,
or 7.7 percent, versus the nearly $19.8 billion in the prior year
quarter. The growth in revenue reflected premium increases to cover
overall cost trends, adjustments made to the prior and current year risk
adjustment estimates in ACA compliant products and higher enrollment in
the Medicaid and Commercial self-funded businesses. These increases were
partially offset by a decline in Local Group fully insured enrollment.
Benefit Expense Ratio: The benefit expense ratio was 84.2
percent in the second quarter of 2016, an increase of 210 basis points
from 82.1 percent in the prior year quarter. The increase was largely
driven by medical cost experience exceeding the net impact of annual
premium rate adjustments and higher membership in the Medicaid business,
which carries a higher benefit expense ratio than the consolidated
company average. Further, the benefit expense ratio reflects the impact
of higher medical cost experience in the Individual business and the
timing of higher medical cost experience in the Local Group business.
The increase was partially offset by adjustments to the prior and
current year risk adjustment estimates in ACA compliant products.
Medical claims reserves established at December 31, 2015 developed
moderately better than the Company's expectation during the first six
months of 2016.
Medical Cost Trend: For the full year 2016, the Company
continues to expect that underlying Local Group medical cost trend will
be in the range of 7.0% - 7.5%.
Days in Claims Payable: Days in Claims Payable ("DCP") was
40.6 days as of June 30, 2016, a decrease of 2.8 days from 43.4 days as
of March 31, 2016.
SG&A Expense Ratio: The SG&A expense ratio was 14.0 percent
in the second quarter of 2016, a decrease of 140 basis points from 15.4
percent in the second quarter of 2015. The decrease was primarily driven
by the impact of lower administrative costs resulting from expense
efficiency initiatives and higher membership in the Medicaid business,
which carries a lower SG&A expense ratio than the consolidated Company
average.
Operating Cash Flow: Operating cash flow was $662 million, or 0.8
times net income in the second quarter of 2016, and approximately $2.0
billion, or 1.3 times net income for the first six months of 2016. The
Company now expects its full year 2016 operating cash flow to be
approximately $3.0 billion.
Share Repurchase Program: The Company did not repurchase any
shares of its common stock during the second quarter of 2016 due to the
pending acquisition of Cigna. As of June 30, 2016, the Company had
nearly $4.2 billion of Board-approved share repurchase authorization
remaining.
Cash Dividend: During the second quarter of 2016, the Company
paid a quarterly dividend of $0.65 per share, representing a
distribution of cash totaling $170.9 million.
On July 26, 2016, the Audit Committee declared a third quarter 2016
dividend to shareholders of $0.65 per share. On an annualized basis,
this equates to a dividend of $2.60 per share. The third quarter
dividend is payable on September 26, 2016, to shareholders of record at
the close of business on September 9, 2016.
Investment Portfolio & Capital Position: During the second
quarter of 2016, the Company recorded net realized gains on financial
instruments totaling $12.5 million and other-than-temporary impairment
losses totaling $25.7 million. During the second quarter of 2015, the
Company recorded net realized gains of $92.3 million, partially offset
by other-than-temporary impairment losses totaling $21.8 million.
As of June 30, 2016, the Company's net unrealized gain position in the
investment portfolio was $957.6 million, consisting of net unrealized
gains on fixed maturity and equity securities totaling $624.3 million
and $333.3 million, respectively. As of June 30, 2016, cash and
investments at the parent company totaled approximately $2.1 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).
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Anthem, Inc.
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Reportable Segment Highlights
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(Unaudited)
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(In millions)
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Three Months Ended June 30
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Six Months Ended June 30
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2016
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2015
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Change
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2016
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2015
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Change
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Operating Revenue
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Commercial & Specialty Business
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$9,898.3
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$9,368.2
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5.7
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%
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$19,408.1
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$18,735.1
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3.6
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%
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Government Business
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11,371.1
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10,385.0
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9.5
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%
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22,165.0
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19,865.1
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11.6
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%
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Other
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5.1
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5.1
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-
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%
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10.8
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9.5
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13.7
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%
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Total Operating Revenue1
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$21,274.5
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$19,758.3
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7.7
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%
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$41,583.9
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$38,609.7
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7.7
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%
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Operating Gain / (Loss)
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Commercial & Specialty Business
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$1,075.3
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$912.0
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17.9
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%
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$2,368.3
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$2,179.0
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8.7
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%
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Government Business
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450.5
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609.7
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(26.1
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)%
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775.5
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934.1
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(17.0
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)%
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Other
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(25.6
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(9.6
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NM
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2
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(73.2
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(21.7
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NM
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2
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Total Operating Gain1
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$1,500.2
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$1,512.1
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(0.8
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)%
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$3,070.6
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$3,091.4
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(0.7
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)%
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Operating Margin
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Commercial & Specialty Business
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10.9
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%
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9.7
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%
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120
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bp
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12.2
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%
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11.6
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%
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60
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bp
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Government Business
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4.0
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%
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5.9
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%
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(190)
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bp
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3.5
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%
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4.7
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%
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(120)
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bp
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Total Operating Margin1
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7.1
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%
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7.7
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%
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(60)
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bp
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7.4
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%
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8.0
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%
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(60)
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bp
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(1) See "Basis of Presentation" on page 6 herein.
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(2) "NM" = calculation not meaningful.
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Commercial & Specialty Business: Operating gain in the
Commercial & Specialty Business segment totaled $1,075.3 million in the
second quarter of 2016, an increase of $163.3 million, or 17.9 percent,
from $912.0 million in the second quarter of 2015. The increase was
driven by adjustments to the prior and current year risk adjustment
estimates in ACA compliant products and a lower SG&A ratio due to lower
administrative costs resulting from expense efficiency initiatives taken
by the Company. This increase was partially offset by higher medical
cost experience in the Individual business and the timing of higher
medical cost experience and fully insured membership declines in the
Local Group business.
Government Business: Operating gain in the Government Business
segment was $450.5 million in the second quarter of 2016, a decrease of
$159.2 million, or 26.1 percent, from $609.7 million in the second
quarter of 2015. The decrease reflects increases in medical cost
experience that exceeded the net impact of annual premium rate
adjustments in the Medicaid business, partially offset by a lower SG&A
ratio due to lower administrative costs resulting from expense
efficiency initiatives taken by the Company.
Other: The Company reported an operating loss of $25.6 million in
the Other segment for the second quarter of 2016, compared with an
operating loss of $9.6 million in the prior year quarter. The increase
in the loss was primarily driven by Cigna acquisition related expenses.
OUTLOOK
Full Year 2016:
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Net income is now expected to be greater than $9.34 per share,
including greater than $1.46 per share of net unfavorable items.
Excluding these items, adjusted net income is expected to be greater
than $10.80 per share (refer to the GAAP reconciliation table).
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Medical membership is now expected to be in the range of 39,600,000 -
39,800,000. Fully insured membership is now expected to be in the
range of 14,950,000 - 15,050,000 and self-funded membership is now
expected to be in the range of 24,650,000 - 24,750,000.
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Operating revenue is now expected to in the range of $82.5 - $83.5
billion.
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Benefit expense ratio is now expected to be in the range of 84.9% plus
or minus 30 basis points.
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SG&A ratio is now expected to be in the range of 14.5% plus or minus
30 basis points.
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Operating cash flow is now expected to be approximately $3.0 billion.
* This outlook does not include any benefits or transaction costs
associated with the pending Cigna acquisition beyond those incurred in
the first six months of 2016.
Basis of Presentation
1.
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Operating revenue and operating gain are the key measures used by
management to evaluate performance in each of its reporting
segments, allocate resources, set incentive compensation targets
and to forecast future operating performance. Operating gain, is
calculated as total operating revenue less benefit expense and
selling, general and administrative expense. It does not include
net investment income, net realized gains/losses on financial
instruments, other-than-temporary impairment losses recognized in
income, interest expense, amortization of other intangible assets,
gains/losses on extinguishment of debt or income taxes, as these
items are managed in a corporate shared service environment and
are not the responsibility of operating segment management (refer
to the GAAP reconciliation tables).
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2.
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Operating margin is defined as operating gain divided by operating
revenue.
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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:
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800-288-8975 (Domestic)
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800-475-6701 (Domestic Replay)
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612-332-0630 (International)
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320-365-3844 (International Replay)
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An access code is not required for today's conference call. The access
code for the replay is 378817. The replay will be available from 11:00
a.m. EDT today, until the end of the day on August 10, 2016. 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.
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
73 million people served by its affiliated companies, including nearly
40 million enrolled in 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.
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Membership Summary
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(Unaudited and in Thousands)
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Change from
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June 30,
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June 30,
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December 31,
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June 30,
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December 31,
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Medical Membership
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2016
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2015
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2015
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2015
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2015
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Customer Type
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Local Group
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15,192
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15,153
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15,241
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0.3
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%
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(0.3
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)%
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Individual
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1,812
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1,844
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1,675
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(1.7
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)%
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8.2
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%
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National:
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National Accounts
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7,808
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7,328
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7,355
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6.6
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%
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6.2
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%
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BlueCard®
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5,604
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5,437
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5,407
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3.1
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%
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3.6
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%
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Total National
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13,412
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12,765
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12,762
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5.1
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%
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5.1
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%
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Medicare
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1,426
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1,432
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1,439
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(0.4
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)%
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(0.9
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)%
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Medicaid
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6,336
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5,764
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5,914
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9.9
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%
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7.1
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%
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FEP
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1,572
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1,569
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1,568
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0.2
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%
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0.3
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%
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Total Medical Membership
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39,750
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38,527
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38,599
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3.2
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%
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3.0
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%
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Funding Arrangement
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Self-Funded
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24,550
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23,510
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23,666
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4.4
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%
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3.7
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%
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Fully-Insured
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15,200
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15,017
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14,933
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1.2
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%
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1.8
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%
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Total Medical Membership
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39,750
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38,527
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38,599
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3.2
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%
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3.0
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%
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Reportable Segment
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Commercial and Specialty Business
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30,416
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29,762
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29,678
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2.2
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%
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2.5
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%
|
Government Business
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|
9,334
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|
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8,765
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|
8,921
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6.5
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%
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|
4.6
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%
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Total Medical Membership
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|
39,750
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38,527
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38,599
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3.2
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%
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3.0
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%
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Other Membership
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Life and Disability Members
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4,689
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|
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4,803
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4,849
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(2.4
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)%
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(3.3
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)%
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Dental Members
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5,413
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|
|
5,159
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|
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5,206
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4.9
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%
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4.0
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%
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Dental Administration Members
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5,369
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|
|
5,296
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|
5,282
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1.4
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%
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1.6
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%
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Vision Members
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5,929
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5,494
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5,641
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7.9
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%
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5.1
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%
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Medicare Advantage Part D Members
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608
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|
609
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|
622
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(0.2
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)%
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(2.3
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)%
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Medicare Part D Standalone Members
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352
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372
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371
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(5.4
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)%
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(5.1
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)%
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Anthem, Inc.
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Consolidated Statements of Income
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(Unaudited)
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Three Months Ended
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(In millions, except per share data)
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June 30
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2016
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2015
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Change
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Revenues
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Premiums
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$
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19,948.0
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$
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18,516.3
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7.7
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%
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Administrative fees
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1,315.8
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1,229.5
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7.0
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%
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Other revenue
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10.7
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12.5
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(14.4
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)%
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Total operating revenue
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21,274.5
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19,758.3
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7.7
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%
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Net investment income
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194.9
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|
|
186.7
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|
4.4
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%
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Net realized gains/(losses) on financial instruments
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12.5
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92.3
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(86.5
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)%
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Other-than-temporary impairment losses on investments:
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Total other-than-temporary impairment losses on investments
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(33.8
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)
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(26.2
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)
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29.0
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%
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Portion of other-than-temporary impairment losses recognized in
other comprehensive income
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8.1
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4.4
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84.1
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%
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Other-than-temporary impairment losses recognized in income
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(25.7
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)
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|
(21.8
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)
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|
17.9
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%
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|
|
|
|
|
|
|
Total revenues
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21,456.2
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|
|
20,015.5
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|
|
7.2
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%
|
|
|
|
|
|
|
|
Expenses
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|
|
|
|
|
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Benefit expense
|
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16,805.2
|
|
|
15,205.4
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|
|
10.5
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%
|
Selling, general and administrative expense:
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|
|
|
|
|
|
Selling expense
|
|
351.5
|
|
|
363.8
|
|
|
(3.4
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)%
|
General and administrative expense
|
|
2,617.6
|
|
|
2,677.0
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|
|
(2.2
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)%
|
Total selling, general and administrative expense
|
|
2,969.1
|
|
|
3,040.8
|
|
|
(2.4
|
)%
|
Interest expense
|
|
185.7
|
|
|
154.1
|
|
|
20.5
|
%
|
Amortization of other intangible assets
|
|
47.9
|
|
|
60.1
|
|
|
(20.3
|
)%
|
Loss on extinguishment of debt
|
|
-
|
|
|
(2.9
|
)
|
|
(100.0
|
)%
|
|
|
|
|
|
|
|
Total expenses
|
|
20,007.9
|
|
|
18,457.5
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
1,448.3
|
|
|
1,558.0
|
|
|
(7.0
|
)%
|
|
|
|
|
|
|
|
Income tax expense
|
|
667.7
|
|
|
698.9
|
|
|
(4.5
|
)%
|
|
|
|
|
|
|
|
Net income
|
|
$
|
780.6
|
|
|
$
|
859.1
|
|
|
(9.1
|
)%
|
|
|
|
|
|
|
|
Net income per diluted share
|
|
$
|
2.91
|
|
|
$
|
3.13
|
|
|
(7.0
|
)%
|
|
|
|
|
|
|
|
Diluted shares
|
|
268.2
|
|
|
274.3
|
|
|
(2.2
|
)%
|
|
|
|
|
|
|
|
Benefit expense as a percentage of premiums
|
|
84.2
|
%
|
|
82.1
|
%
|
|
210
|
bp
|
Selling, general and administrative expense as a percentage of total
operating revenue
|
|
14.0
|
%
|
|
15.4
|
%
|
|
(140
|
)bp
|
Income before income taxes as a percentage of total revenue
|
|
6.8
|
%
|
|
7.8
|
%
|
|
(100
|
)bp
|
(1) "NM" = calculation not meaningful
|
Anthem, Inc.
|
Consolidated Statements of Income
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
(In millions, except per share data)
|
|
June 30
|
|
|
|
|
2016
|
|
2015
|
|
Change
|
Revenues
|
|
|
|
|
|
|
Premiums
|
|
$
|
38,936.9
|
|
|
$
|
36,126.8
|
|
|
7.8
|
%
|
Administrative fees
|
|
2,626.8
|
|
|
2,456.6
|
|
|
6.9
|
%
|
Other revenue
|
|
20.2
|
|
|
26.3
|
|
|
(23.2
|
)%
|
Total operating revenue
|
|
41,583.9
|
|
|
38,609.7
|
|
|
7.7
|
%
|
Net investment income
|
|
366.0
|
|
|
354.3
|
|
|
3.3
|
%
|
Net realized gains/(losses) on financial instruments
|
|
(112.6
|
)
|
|
138.8
|
|
|
(181.1
|
)%
|
Other-than-temporary impairment losses on investments:
|
|
|
|
|
|
|
Total other-than-temporary impairment losses on investments
|
|
(119.0
|
)
|
|
(41.6
|
)
|
|
186.1
|
%
|
Portion of other-than-temporary impairment losses recognized in
other comprehensive income
|
|
26.4
|
|
|
5.8
|
|
|
355.2
|
%
|
Other-than-temporary impairment losses recognized in income
|
|
(92.6
|
)
|
|
(35.8
|
)
|
|
158.7
|
%
|
|
|
|
|
|
|
|
Total revenues
|
|
41,744.7
|
|
|
39,067.0
|
|
|
6.9
|
%
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
Benefit expense
|
|
32,344.0
|
|
|
29,332.3
|
|
|
10.3
|
%
|
Selling, general and administrative expense:
|
|
|
|
|
|
|
Selling expense
|
|
701.4
|
|
|
732.0
|
|
|
(4.2
|
)%
|
General and administrative expense
|
|
5,467.9
|
|
|
5,454.0
|
|
|
0.3
|
%
|
Total selling, general and administrative expense
|
|
6,169.3
|
|
|
6,186.0
|
|
|
(0.3
|
)%
|
Interest expense
|
|
372.8
|
|
|
308.5
|
|
|
20.8
|
%
|
Amortization of other intangible assets
|
|
98.3
|
|
|
112.6
|
|
|
(12.7
|
)%
|
Loss on extinguishment of debt
|
|
-
|
|
|
0.5
|
|
|
(100.0
|
)%
|
|
|
|
|
|
|
|
Total expenses
|
|
38,984.4
|
|
|
35,939.9
|
|
|
8.5
|
%
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
2,760.3
|
|
|
3,127.1
|
|
|
(11.7
|
)%
|
|
|
|
|
|
|
|
Income tax expense
|
|
1,276.7
|
|
|
1,402.8
|
|
|
(9.0
|
)%
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,483.6
|
|
|
$
|
1,724.3
|
|
|
(14.0
|
)%
|
|
|
|
|
|
|
|
Net income per diluted share
|
|
$
|
5.54
|
|
|
$
|
6.22
|
|
|
(10.9
|
)%
|
|
|
|
|
|
|
|
Diluted shares
|
|
267.8
|
|
|
277.3
|
|
|
(3.4
|
)%
|
|
|
|
|
|
|
|
Benefit expense as a percentage of premiums
|
|
83.1
|
%
|
|
81.2
|
%
|
|
190
|
bp
|
Selling, general and administrative expense as a percentage of total
operating revenue
|
|
14.8
|
%
|
|
16.0
|
%
|
|
(120
|
)bp
|
Income before income taxes as a percentage of total revenue
|
|
6.6
|
%
|
|
8.0
|
%
|
|
(140
|
)bp
|
(1) "NM" = calculation not meaningful
|
Anthem, Inc.
|
Consolidated Balance Sheets
|
|
|
|
June 30,
|
|
December 31,
|
(In millions)
|
|
2016
|
|
2015
|
Assets
|
|
(Unaudited)
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,582.7
|
|
|
$
|
2,113.5
|
|
Investments available-for-sale, at fair value:
|
|
|
|
|
Fixed maturity securities
|
|
18,563.2
|
|
|
16,920.0
|
|
Equity securities
|
|
1,633.5
|
|
|
1,441.8
|
|
Other invested assets, current
|
|
18.8
|
|
|
19.1
|
|
Accrued investment income
|
|
168.7
|
|
|
170.8
|
|
Premium and self-funded receivables
|
|
5,260.9
|
|
|
4,602.8
|
|
Other receivables
|
|
2,125.2
|
|
|
2,421.4
|
|
Income taxes receivable
|
|
9.0
|
|
|
316.6
|
|
Securities lending collateral
|
|
1,512.4
|
|
|
1,300.4
|
|
Other current assets
|
|
2,083.3
|
|
|
1,555.7
|
|
Total current assets
|
|
32,957.7
|
|
|
30,862.1
|
|
|
|
|
|
|
Long-term investments available-for-sale, at fair value:
|
|
|
|
|
Fixed maturity securities
|
|
512.0
|
|
|
558.2
|
|
Equity securities
|
|
30.9
|
|
|
31.0
|
|
Other invested assets, long-term
|
|
2,088.1
|
|
|
2,041.1
|
|
Property and equipment, net
|
|
1,989.8
|
|
|
2,019.8
|
|
Goodwill
|
|
17,562.2
|
|
|
17,562.2
|
|
Other intangible assets
|
|
8,059.7
|
|
|
8,158.0
|
|
Other noncurrent assets
|
|
862.2
|
|
|
485.4
|
|
Total assets
|
|
$
|
64,062.6
|
|
|
$
|
61,717.8
|
|
|
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
Liabilities
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Policy liabilities:
|
|
|
|
|
Medical claims payable
|
|
$
|
7,498.6
|
|
|
$
|
7,569.8
|
|
Reserves for future policy benefits
|
|
69.5
|
|
|
71.9
|
|
Other policyholder liabilities
|
|
2,390.8
|
|
|
2,256.5
|
|
Total policy liabilities
|
|
9,958.9
|
|
|
9,898.2
|
|
Unearned income
|
|
832.8
|
|
|
1,145.5
|
|
Accounts payable and accrued expenses
|
|
4,272.2
|
|
|
3,318.8
|
|
Security trades pending payable
|
|
110.9
|
|
|
73.1
|
|
Securities lending payable
|
|
1,512.0
|
|
|
1,300.9
|
|
Short-term borrowings
|
|
440.0
|
|
|
540.0
|
|
Current portion of long-term debt
|
|
927.9
|
|
|
-
|
|
Other current liabilities
|
|
2,762.1
|
|
|
2,816.1
|
|
Total current liabilities
|
|
20,816.8
|
|
|
19,092.6
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
14,202.4
|
|
|
15,324.5
|
|
Reserves for future policy benefits, noncurrent
|
|
625.1
|
|
|
631.7
|
|
Deferred tax liabilities, net
|
|
2,704.9
|
|
|
2,630.6
|
|
Other noncurrent liabilities
|
|
1,479.8
|
|
|
994.3
|
|
Total liabilities
|
|
39,829.0
|
|
|
38,673.7
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
Common stock
|
|
2.6
|
|
|
2.6
|
|
Additional paid-in capital
|
|
8,677.5
|
|
|
8,555.6
|
|
Retained earnings
|
|
15,918.4
|
|
|
14,778.5
|
|
Accumulated other comprehensive loss
|
|
(364.9
|
)
|
|
(292.6
|
)
|
Total shareholders' equity
|
|
24,233.6
|
|
|
23,044.1
|
|
Total liabilities and shareholders' equity
|
|
$
|
64,062.6
|
|
|
$
|
61,717.8
|
|
|
|
Anthem, Inc.
|
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
|
|
|
|
(In millions)
|
|
Six Months Ended June 30
|
|
|
2016
|
|
2015
|
Operating activities
|
|
|
|
|
|
Net income
|
|
$1,483.6
|
|
$1,724.3
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
Net realized losses/(gains) on financial instruments
|
|
112.6
|
|
|
(138.8
|
)
|
Other-than-temporary impairment losses recognized in income
|
|
92.6
|
|
|
35.8
|
|
Loss on extinguishment of debt
|
|
-
|
|
|
0.5
|
|
Loss on disposal of assets
|
|
0.6
|
|
|
1.2
|
|
Deferred income taxes
|
|
99.7
|
|
|
47.5
|
|
Amortization, net of accretion
|
|
399.4
|
|
|
655.5
|
|
Depreciation expense
|
|
51.7
|
|
|
50.3
|
|
Share-based compensation
|
|
82.4
|
|
|
68.6
|
|
Excess tax benefits from share-based compensation
|
|
(46.0
|
)
|
|
(89.0
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Receivables, net
|
|
(332.8
|
)
|
|
(318.5
|
)
|
Other invested assets
|
|
(13.2
|
)
|
|
(4.0
|
)
|
Other assets
|
|
(284.5
|
)
|
|
(388.9
|
)
|
Policy liabilities
|
|
54.1
|
|
|
278.8
|
|
Unearned income
|
|
(312.7
|
)
|
|
(161.1
|
)
|
Accounts payable and accrued expenses
|
|
280.0
|
|
|
231.1
|
|
Other liabilities
|
|
(17.1
|
)
|
|
488.1
|
|
Income taxes
|
|
338.2
|
|
|
347.9
|
|
Other, net
|
|
(22.3
|
)
|
|
(5.8
|
)
|
Net cash provided by operating activities
|
|
1,966.3
|
|
|
2,823.5
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
Purchases of fixed maturity securities
|
|
(5,509.3
|
)
|
|
(5,530.6
|
)
|
Proceeds from sales and maturities of fixed maturity securities
|
|
4,836.8
|
|
|
5,036.5
|
|
Purchases of equity securities
|
|
(1,032.3
|
)
|
|
(1,389.5
|
)
|
Proceeds from sales of equity securities
|
|
486.4
|
|
|
1,085.9
|
|
Purchases of other invested assets
|
|
(261.1
|
)
|
|
(161.1
|
)
|
Proceeds from sales of other invested assets
|
|
219.4
|
|
|
38.3
|
|
Change in collateral and settlement of non-hedging derivatives
|
|
14.7
|
|
|
(32.0
|
)
|
Changes in securities lending collateral
|
|
(211.2
|
)
|
|
(202.9
|
)
|
Purchases of subsidiaries, net of cash acquired
|
|
-
|
|
|
(641.6
|
)
|
Net purchases of property and equipment
|
|
(251.2
|
)
|
|
(229.7
|
)
|
Net cash used in investing activities
|
|
(1,707.8
|
)
|
|
(2,026.7
|
)
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
Net (repayments of)/proceeds from commercial paper borrowings
|
|
(225.2
|
)
|
|
697.4
|
|
Net proceeds from short-term borrowings
|
|
(100.0
|
)
|
|
140.0
|
|
Net repayments of long-term borrowings
|
|
-
|
|
|
(701.3
|
)
|
Changes in securities lending payable
|
|
211.1
|
|
|
202.9
|
|
Changes in bank overdrafts
|
|
15.2
|
|
|
(233.1
|
)
|
Premiums paid on equity call options
|
|
-
|
|
|
(16.6
|
)
|
Proceeds from sale of put options
|
|
-
|
|
|
16.5
|
|
Repurchase and retirement of common stock
|
|
-
|
|
|
(1,410.6
|
)
|
Change in collateral and settlements of debt-related investments
|
|
(467.5
|
)
|
|
-
|
|
Cash dividends
|
|
(341.6
|
)
|
|
(330.5
|
)
|
Proceeds from issuance of common stock under employee stock plans
|
|
71.7
|
|
|
155.2
|
|
Excess tax benefits from share-based compensation
|
|
46.0
|
|
|
89.0
|
|
Net cash used in financing activities
|
|
(790.3
|
)
|
|
(1,391.1
|
)
|
|
|
|
|
|
|
Effect of foreign exchange rates on cash and cash equivalents
|
|
1.0
|
|
|
(4.4
|
)
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
(530.8
|
)
|
|
(598.7
|
)
|
Cash and cash equivalents at beginning of year
|
|
2,113.5
|
|
|
2,151.7
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$1,582.7
|
|
$1,553.0
|
|
|
Anthem, Inc.
|
Reconciliation of Medical Claims Payable
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
Years Ended December 31
|
|
2016
|
|
2015
|
|
2015
|
|
2014
|
|
2013
|
(In millions)
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross medical claims payable, beginning of period
|
$
|
7,569.8
|
|
|
$
|
6,861.2
|
|
|
$
|
6,861.2
|
|
|
$
|
6,127.2
|
|
|
$
|
6,174.5
|
|
Ceded medical claims payable, beginning of period
|
(645.6
|
)
|
|
(767.4
|
)
|
|
(767.4
|
)
|
|
(23.4
|
)
|
|
(27.2
|
)
|
Net medical claims payable, beginning of period
|
6,924.2
|
|
|
6,093.8
|
|
|
6,093.8
|
|
|
6,103.8
|
|
|
6,147.3
|
|
|
|
|
|
|
|
|
|
|
|
Business combinations and purchase adjustments
|
-
|
|
|
121.8
|
|
|
121.8
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net incurred medical claims:
|
|
|
|
|
|
|
|
|
|
Current year
|
32,452.2
|
|
|
29,516.8
|
|
|
60,708.4
|
|
|
56,305.8
|
|
|
55,894.3
|
|
Prior years redundancies(1)
|
(726.3
|
)
|
|
(760.9
|
)
|
|
(800.2
|
)
|
|
(541.9
|
)
|
|
(599.1
|
)
|
Total net incurred medical claims
|
31,725.9
|
|
|
28,755.9
|
|
|
59,908.2
|
|
|
55,763.9
|
|
|
55,295.2
|
|
|
|
|
|
|
|
|
|
|
|
Net payments attributable to:
|
|
|
|
|
|
|
|
|
|
Current year medical claims
|
26,197.1
|
|
|
24,249.2
|
|
|
54,067.7
|
|
|
50,353.9
|
|
|
49,887.2
|
|
Prior years medical claims
|
5,541.4
|
|
|
4,594.8
|
|
|
5,131.9
|
|
|
5,420.0
|
|
|
5,451.5
|
|
Total net payments
|
31,738.5
|
|
|
28,844.0
|
|
|
59,199.6
|
|
|
55,773.9
|
|
|
55,338.7
|
|
|
|
|
|
|
|
|
|
|
|
Net medical claims payable, end of period
|
6,911.6
|
|
|
6,127.5
|
|
|
6,924.2
|
|
|
6,093.8
|
|
|
6,103.8
|
|
Ceded medical claims payable, end of period
|
587.0
|
|
|
1,050.4
|
|
|
645.6
|
|
|
767.4
|
|
|
23.4
|
|
Gross medical claims payable, end of period
|
$
|
7,498.6
|
|
|
$
|
7,177.9
|
|
|
$
|
7,569.8
|
|
|
$
|
6,861.2
|
|
|
$
|
6,127.2
|
|
|
|
|
|
|
|
|
|
|
|
Current year medical claims paid as a percentage of current year net
incurred medical claims
|
80.7
|
%
|
|
82.2
|
%
|
|
89.1
|
%
|
|
89.4
|
%
|
|
89.3
|
%
|
|
|
|
|
|
|
|
|
|
|
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
|
11.7
|
%
|
|
14.3
|
%
|
|
15.1
|
%
|
|
9.7
|
%
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Prior year redundancies in the current year as a percentage of prior
year net incurred medical claims
|
1.2
|
%
|
|
1.4
|
%
|
|
1.4
|
%
|
|
1.0
|
%
|
|
1.3
|
%
|
|
|
|
|
|
|
|
|
|
|
(1) Negative amounts reported for net incurred medical
claims related to prior years result from claims being settled for amounts
less than originally estimated.
|
|
Anthem, Inc.
|
GAAP Reconciliation
|
(Unaudited)
|
|
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.
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30
|
|
|
|
June 30
|
|
|
(In millions, except per share data)
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
Net income
|
|
$
|
780.6
|
|
|
$
|
859.1
|
|
|
(9.1
|
)%
|
|
$
|
1,483.6
|
|
|
$
|
1,724.3
|
|
|
(14.0
|
)%
|
Add / (Subtract):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized (gains)/losses on financial instruments
|
|
(12.5
|
)
|
|
(92.3
|
)
|
|
|
|
112.6
|
|
|
(138.8
|
)
|
|
|
Other-than-temporary impairment losses on investments
|
|
25.7
|
|
|
21.8
|
|
|
|
|
92.6
|
|
|
35.8
|
|
|
|
Transaction related costs
|
|
79.2
|
|
|
-
|
|
|
|
|
174.7
|
|
|
-
|
|
|
|
Amortization of other intangible assets
|
|
47.9
|
|
|
60.1
|
|
|
|
|
98.3
|
|
|
112.6
|
|
|
|
Deferred tax asset write-off from California tax legislation
|
|
20.7
|
|
|
-
|
|
|
|
|
20.7
|
|
|
-
|
|
|
|
(Gain)/Loss on extinguishment of debt
|
|
-
|
|
|
(2.9
|
)
|
|
|
|
-
|
|
|
0.5
|
|
|
|
Tax impact of non-GAAP adjustments
|
|
(48.2
|
)
|
|
4.7
|
|
|
|
|
(164.0
|
)
|
|
(3.5
|
)
|
|
|
Net adjustment items
|
|
112.8
|
|
|
(8.6
|
)
|
|
|
|
334.9
|
|
|
6.6
|
|
|
|
Adjusted net income
|
|
$
|
893.4
|
|
|
$
|
850.5
|
|
|
5.0
|
%
|
|
$
|
1,818.5
|
|
|
$
|
1,730.9
|
|
|
5.1
|
%
|
Net income per diluted share
|
|
$
|
2.91
|
|
|
$
|
3.13
|
|
|
(7.0
|
)%
|
|
$
|
5.54
|
|
|
$
|
6.22
|
|
|
(10.9
|
)%
|
Add / (Subtract):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized (gains)/losses on financial instruments
|
|
(0.05
|
)
|
|
(0.34
|
)
|
|
|
|
0.42
|
|
|
(0.50
|
)
|
|
|
Other-than-temporary impairment losses on investments
|
|
0.10
|
|
|
0.08
|
|
|
|
|
0.35
|
|
|
0.13
|
|
|
|
Transaction related costs
|
|
0.30
|
|
|
-
|
|
|
|
|
0.65
|
|
|
-
|
|
|
|
Amortization of other intangible assets
|
|
0.18
|
|
|
0.22
|
|
|
|
|
0.37
|
|
|
0.41
|
|
|
|
Deferred tax asset write-off from California tax legislation
|
|
0.08
|
|
|
-
|
|
|
|
|
0.08
|
|
|
-
|
|
|
|
(Gain)/Loss on extinguishment of debt
|
|
-
|
|
|
(0.01
|
)
|
|
|
|
-
|
|
|
-
|
|
|
|
Tax impact of non-GAAP adjustments
|
|
(0.18
|
)
|
|
0.02
|
|
|
|
|
(0.61
|
)
|
|
(0.01
|
)
|
|
|
Rounding Impact
|
|
(0.01
|
)
|
|
-
|
|
|
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
|
Net adjustment items
|
|
0.42
|
|
|
(0.03
|
)
|
|
|
|
1.25
|
|
|
0.02
|
|
|
|
Adjusted net income per diluted share
|
|
$
|
3.33
|
|
|
$
|
3.10
|
|
|
7.4
|
%
|
|
$
|
6.79
|
|
|
$
|
6.24
|
|
|
8.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full Year 2016 Outlook
|
|
|
|
|
|
|
|
|
Net income per diluted share
|
|
Greater than $9.34
|
|
|
|
|
|
|
|
|
Add / (Subtract):
|
|
|
|
|
|
|
|
|
|
|
Net realized (gains)/losses on financial instruments
|
|
$0.42
|
|
|
|
|
|
|
|
|
|
Other-than-temporary impairment losses on investments
|
|
$0.35
|
|
|
|
|
|
|
|
|
|
Transaction related costs
|
|
$0.65
|
|
|
|
|
|
|
|
|
|
Deferred tax asset write-off from California tax legislation
|
|
$0.08
|
|
|
|
|
|
|
|
|
|
Amortization of other intangible assets
|
|
Greater than $0.70
|
|
|
|
|
|
|
|
|
Tax impact of non-GAAP adjustments
|
|
Less than ($0.74)
|
|
|
|
|
|
|
|
|
Net adjustment items
|
|
Greater than $1.46
|
|
|
|
|
|
|
|
|
Adjusted net income per diluted share
|
|
Greater than $10.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30
|
|
|
|
June 30
|
|
|
(In millions)
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
Reportable segments operating gain
|
|
$
|
1,500.2
|
|
|
$
|
1,512.1
|
|
|
(0.8
|
)%
|
|
$
|
3,070.6
|
|
|
$
|
3,091.4
|
|
|
(0.7
|
)%
|
Net investment income
|
|
194.9
|
|
|
186.7
|
|
|
|
|
366.0
|
|
|
354.3
|
|
|
|
Net realized gains/(losses) on financial instruments
|
|
12.5
|
|
|
92.3
|
|
|
|
|
(112.6
|
)
|
|
138.8
|
|
|
|
Other-than-temporary impairment losses recognized in income
|
|
(25.7
|
)
|
|
(21.8
|
)
|
|
|
|
(92.6
|
)
|
|
(35.8
|
)
|
|
|
Interest expense
|
|
(185.7
|
)
|
|
(154.1
|
)
|
|
|
|
(372.8
|
)
|
|
(308.5
|
)
|
|
|
Amortization of other intangible assets
|
|
(47.9
|
)
|
|
(60.1
|
)
|
|
|
|
(98.3
|
)
|
|
(112.6
|
)
|
|
|
Gain/(Loss) on extinguishment of debt
|
|
-
|
|
|
2.9
|
|
|
|
|
-
|
|
|
(0.5
|
)
|
|
|
Income from continuing operations before income tax expense
|
|
$
|
1,448.3
|
|
|
$
|
1,558.0
|
|
|
(7.0
|
)%
|
|
$
|
2,760.3
|
|
|
$
|
3,127.1
|
|
|
(11.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward-Looking Statements
This document contains certain forward-looking information about us
that is intended to be covered by the safe harbor for "forward-looking
statements" provided by the Private Securities Litigation Reform Act of
1995. Forward-looking statements 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. These risks and uncertainties include: those discussed and
identified in our public filings with the U.S. Securities and Exchange
Commission, or SEC; increased government participation in, or regulation
or taxation of health benefits and managed care operations, including,
but not limited to, the impact of the Patient Protection and Affordable
Care Act and the Health Care and Education Reconciliation Act of 2010,
or Health Care Reform; trends in health care costs and utilization
rates; our ability to secure sufficient premium rates including
regulatory approval for and implementation of such rates; our
participation in federal and state health insurance exchanges under
Health Care Reform, which have experienced and continue to experience
challenges due to implementation of initial and phased-in provisions of
Health Care Reform, and which entail uncertainties associated with the
mix and volume of business, particularly in our Individual and Small
Group markets, that could negatively impact the adequacy of our premium
rates and which may not be sufficiently offset by the risk apportionment
provisions of Health Care Reform; the ultimate outcome of our pending
acquisition of Cigna Corporation ("Cigna") (the "Acquisition"),
including our ability to achieve the synergies and value creation
contemplated by the Acquisition within the expected time period, or at
all, and the risk that unexpected costs will be incurred in connection
therewith; the ultimate outcome and results of integrating our and
Cigna's operations and disruption from the Acquisition making it more
difficult to maintain businesses and operational relationships; the
possibility that the Acquisition does not close, including, but not
limited to, due to the failure to satisfy the closing conditions,
including the receipt of required regulatory approvals; the risks and
uncertainties detailed by Cigna with respect to its business as
described in its reports and documents filed with the SEC; our ability
to contract with providers on cost-effective and competitive terms;
competitor pricing below market trends of increasing costs; reduced
enrollment, as well as a negative change in our health care product mix;
risks and uncertainties regarding Medicare and Medicaid programs,
including those related to non-compliance with the complex regulations
imposed thereon and funding risks with respect to revenue received from
participation therein; a downgrade in our financial strength ratings;
increases in costs and other liabilities associated with increased
litigation, government investigations, audits or reviews; medical
malpractice or professional liability claims or other risks related to
health care services provided by our subsidiaries; 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; non-compliance by any party with the Express Scripts,
Inc. pharmacy benefit management services agreement, which could result
in financial penalties, our inability to meet customer demands, and
sanctions imposed by governmental entities, including the Centers for
Medicare and Medicaid Services; events that result in negative publicity
for us or the health benefits industry; failure to effectively maintain
and modernize our information systems; events that may negatively affect
our licenses with the Blue Cross and Blue Shield Association; state
guaranty fund assessments for insolvent insurers; possible impairment of
the value of our intangible assets if future results do not adequately
support goodwill and other intangible assets; intense competition to
attract and retain employees; unauthorized disclosure of member or
employee sensitive or confidential information, including the impact and
outcome of investigations, inquiries, claims and litigation related to
the cyber-attack we reported in February 2015; changes in economic and
market conditions, as well as regulations that may negatively affect our
investment portfolios and liquidity; possible restrictions in the
payment of dividends by our subsidiaries and increases in required
minimum levels of capital and the potential negative effect from our
substantial amount of outstanding indebtedness; general risks associated
with mergers, acquisitions and strategic alliances; various laws and
provisions in our governing documents that may prevent or discourage
takeovers and business combinations; future public health epidemics and
catastrophes; and general economic downturns. Readers are cautioned not
to place undue reliance on these forward-looking statements that speak
only as of the date hereof. We do not undertake to update or revise any
forward-looking statements, except as required by applicable securities
laws. Investors are also advised to carefully review and consider
the various risks and other disclosures discussed in our SEC reports.
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