WellPoint, Inc. WLP today announced that first quarter 2014 net income was $701.0 million, or $2.40 per share. These results included net gains of approximately $0.10 per share. Net income in the first quarter of 2013 was $885.2 million, or $2.89 per share, which included net investment losses of approximately $0.05 per share.
Excluding the items noted in each period, adjusted net income was $2.30 per share in the first quarter of 2014, a decrease of 21.8 percent compared with adjusted net income of $2.94 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 better than expected first quarter results reflect our value proposition in the market, the benefits we are seeing from our strategic investments and our intense focus on execution. Our membership is growing across our platforms and we are pleased with the progress we have seen in the exchanges. Provider collaboration remains a focus for us and we are working closely with all types of healthcare providers to drive value for consumers. We are off to a strong start, supporting an increase in our earnings guidance for the full year,” said Joseph Swedish, chief executive officer.
“First quarter adjusted earnings per share of $2.30 exceeded our expectations and we are pleased with how 2014 has progressed so far,” said Wayne DeVeydt, executive vice president and chief financial officer. “Looking ahead, we now project adjusted earnings per share to be greater than $8.40 for 2014, reflecting balanced enrollment growth across our served markets.”
CONSOLIDATED HIGHLIGHTS
Membership: Medical enrollment totaled approximately 36.9 million members at March 31, 2014, an increase of approximately 1.3 million members, or 3.6 percent, from 35.7 million at December 31, 2013. Commercial and Specialty Business segment enrollment increased by 1.2 million members, as the company experienced growth in the National, Local Group, and Individual markets. Membership also grew in the Medicaid and FEP business by 121,000 and 16,000 members, respectively, partially offset by a decline in the Medicare business of 62,000 members.
Operating Revenue: Operating revenue exceeded $17.6 billion in the first quarter of 2014, an increase of approximately $210 million, or 1.2 percent, compared with approximately $17.4 billion in the prior year quarter. The growth in revenue reflected premium increases to cover overall cost trends and new fees associated with Health Care Reform, as well as higher membership in the Medicaid, Commercial self-funded and FEP businesses. These increases were partially offset by a decline in the Local Group business due to the State of New York contract conversion to a self-funded arrangement, as previously disclosed, and a decline in Medicare revenue reflecting lower enrollment as the company repositioned its Medicare Advantage product offerings.
Benefit Expense Ratio: The benefit expense ratio was 82.7 percent in the first quarter of 2014, a decrease of 100 basis points from 83.7 percent in the prior year quarter. The decline was primarily due to an improvement in the Medicaid business. The Commercial and Specialty Business segment benefit expense ratio was stable versus the first quarter of 2013, as an increase resulting from the change in the mix of the product portfolio, predominantly due to the implementation of Health Care Reform product offerings, was largely offset by the impact of higher premium revenue designed to help cover new Health Care Reform fees.
Medical claims reserves established at December 31, 2013, developed modestly better than the Company's expectation during the first quarter of 2014.
Medical Cost Trend: For the full year 2014, the Company continues to expect that underlying Local Group medical cost trend will be in the range of 6.5 percent plus or minus 50 basis points.
Days in Claims Payable: Days in Claims Payable (“DCP”) was 44.2 days as of March 31, 2014, an increase of 5.5 days from 38.7 days as of December 31, 2013. The increase was due primarily to an increase in medical claim reserves, due in part to the timing of Individual enrollment and related benefit payments.
SG&A Expense Ratio: The SG&A expense ratio was 16.2 percent in the first quarter of 2014, an increase of 280 basis points from 13.4 percent in the first quarter of 2013. The increase was driven by new fees related to Health Care Reform effective January 1, 2014, continued investment spending in connection with the Health Care Reform driven market changes, and higher administrative costs as a result of strong membership growth during the first quarter of 2014.
Operating Cash Flow: Operating cash flow was $1.4 billion, or 2.0 times net income, in the first quarter of 2014, partially reflecting the timing of Individual enrollment and related benefit payments this year and the timing of payments related to various health care reform fees.
Share Repurchase Program: During the first quarter of 2014, the Company repurchased nearly 14.3 million shares of its common stock, or 4.9 percent of the shares outstanding as of December 31, 2013, for almost $1.3 billion, or a weighted-average price of $88.14. As of March 31, 2014, the Company had approximately $2.4 billion of Board-approved share repurchase authorization remaining.
Cash Dividend: During the first quarter of 2014, the Company paid a quarterly dividend of $0.4375 per share, representing a distribution of cash totaling $123.4 million.
On April 29, 2014, the Audit Committee declared a second quarter 2014 dividend to shareholders of $0.4375 per share. On an annualized basis, this equates to a dividend of $1.75 per share. The second quarter dividend is payable on June 25, 2014, to shareholders of record at the close of business on June 10, 2014.
Investment Portfolio & Capital Position: During the first quarter of 2014, the Company recorded net realized gains on investments totaling $41.7 million, partially offset by other-than-temporary impairment losses totaling $10.8 million. During the first quarter of 2013, the Company recorded other-than-temporary impairment losses totaling $37.9 million, partially offset by net realized gains on investments totaling $16.8 million.
As of March 31, 2014, the Company's net unrealized gain position in the investment portfolio was $994.7 million, consisting of net unrealized gains on equity and fixed maturity securities totaling $593.7 million and $401.0 million, respectively. As of March 31, 2014, cash and investments at the parent company totaled approximately $2.0 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
WellPoint, 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).
| WellPoint, Inc. | |||||||||||
| Reportable Segment Highlights | |||||||||||
| (Unaudited) | |||||||||||
| (In millions) | Three Months Ended March 31 | ||||||||||
| 2014 | 2013 | Change | |||||||||
| Operating Revenue | |||||||||||
| Commercial & Specialty Business | $9,697.5 | $9,859.4 | (1.6 | %) | |||||||
| Government Business | 7,941.3 | 7,569.4 | 4.9 | % | |||||||
| Other | 6.0 | 6.3 | (4.8 | %) | |||||||
| Total Operating Revenue | 17,644.8 | 17,435.1 | 1.2 | % | |||||||
| Operating Gain / (Loss) | |||||||||||
| Commercial & Specialty Business | $886.1 | $1,262.1 | (29.8 | %) | |||||||
| Government Business | 239.6 | 102.6 | 133.5 | % | |||||||
| Other | (7.0 | ) | (7.4 | ) | 5.4 | % | |||||
| Total Operating Gain | 1,118.7 | 1,357.3 | (17.6 | %) | |||||||
| Operating Margin | |||||||||||
| Commercial & Specialty Business | 9.1 | % | 12.8 | % | (370) bp | ||||||
| Government Business | 3.0 | % | 1.4 | % | 160 bp | ||||||
| Total Operating Margin | 6.3 | % | 7.8 | % | (150) bp | ||||||
Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled $886.1 million in the first quarter of 2014, a decrease of $376.0 million, or 29.8 percent, from $1,262.1 million in the first quarter of 2013. The decrease was driven primarily by increased SG&A expenses reflecting continued investment spending in connection with Health Care Reform driven market changes and higher administrative costs as a result of strong Commercial membership growth during the first quarter of 2014. The Commercial & Specialty Business segment benefit expense ratio was stable versus the first quarter of 2013, as an increase resulting from the change in the mix of the product portfolio, predominantly due to the implementation of Health Care Reform product offerings, was largely offset by the impact of higher premium revenue designed to help cover new Health Care Reform fees.
Government Business: Operating gain in the Government Business segment was $239.6 million in the first quarter of 2014, an increase of $137.0 million, or 133.5 percent, from $102.6 million in the first quarter of 2013. The increase was driven by improved results in the Medicaid business, as a result of securing actuarially sound rates, improved operating cost efficiency and improved medical cost performance.
Other: The Company reported an operating loss of $7.0 million in the Other segment for the first quarter of 2014, compared with an operating loss of $7.4 million in the prior year quarter.
OUTLOOK
Full Year 2014:
- Net income is now expected to be greater than $8.50 per share, including $0.10 per share of net favorable items in the first quarter. Excluding these items, adjusted net income is expected to be greater than $8.40 per share (refer to the GAAP reconciliation table).
- Medical membership is now expected to be in the range of 36,950,000 – 37,050,000. Fully insured membership is now expected to be in the range of 14,500,000 – 14,550,000 and self-funded membership is now expected to be in the range of 22,450,000 – 22,500,000.
- Operating revenue is now expected to be greater than $73.5 billion.
- Benefit expense ratio is expected to be in the range of 83.7% plus or minus 30 basis points.
- SG&A ratio is expected to be in the range of 15.8% plus or minus 30 basis points.
- Operating Cash flow is expected to be greater than $2.4 billion.
Basis of Presentation
1. 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, which is a non-GAAP measure, 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 investments, other-than-temporary impairment losses recognized in income, interest expense, amortization of other intangible assets, loss 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 GAAP reconciliation tables).
2. Operating margin is defined as operating gain divided by operating revenue. Consolidated operating margin is a non-GAAP measure.
3. In late December 2013, WellPoint, Inc. entered into agreements to divest its 1-800 CONTACTS subsidiary and related assets. As a result, the Company reclassified the current and prior period results of 1-800 CONTACTS as discontinued operations, net of the related tax effects. The 1-800 CONTACTS subsidiary and related assets sale was completed on January 31, 2014.
4. Certain prior period amounts have been reclassified to conform to current period presentation. The Employer Group Medicare Advantage business has been reclassified effective January 1, 2014, from the Government Business segment to the Commercial and Specialty Business segment (refer to Reclassified Reportable Segment Highlights table for prior period reclassified financial results by business segment).
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:
| 800-230-1096 (Domestic) | 800-475-6701 (Domestic Replay) | ||||||||
| 612-332-0107 (International) | 320-365-3844 (International Replay) | ||||||||
An access code is not required for today's conference call. The access code for the replay is 310061. The replay will be available from 11:00 a.m. EDT today, until the end of the day on May 14, 2014. The call will also be available through a live webcast at www.wellpoint.com under “Investors.” A webcast replay will be available following the call.
About WellPoint, Inc.
WellPoint is one of the nation's leading health benefits companies. We believe that our health connects us all. So we focus on being a valued health partner and delivering quality products and services that give members access to the care they need. With nearly 67 million people served by our affiliated companies including nearly 37 million enrolled in our family of health plans, we can make a real difference to meet the needs of our diverse customers. We're an independent licensee of the Blue Cross and Blue Shield Association. We serve members as the Blue Cross licensee for California; and as the Blue Cross and Blue Shield licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (as the Blue Cross Blue Shield licensee in 10 New York City metropolitan and surrounding counties and as the Blue Cross or Blue Cross Blue Shield licensee in selected upstate counties only), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.), and Wisconsin. In most of these service areas, our plans do business as Anthem Blue Cross, Anthem Blue Cross and Blue Shield, Blue Cross and Blue Shield of Georgia and Empire Blue Cross Blue Shield, or Empire Blue Cross (in the New York service areas). We also serve customers in other states through our Amerigroup and CareMore subsidiaries. To find out more about us, go to wellpoint.com.
| WellPoint, Inc. | |||||||||||||
| Membership Summary | |||||||||||||
| (Unaudited and in Thousands) | |||||||||||||
| Change from | |||||||||||||
| March 31, | March 31, | December 31, | March 31, | December 31, | |||||||||
|
Medical Membership |
2014 | 2013 | 2013 | 2013 | 2013 | ||||||||
| Customer Type | |||||||||||||
| Local Group | 15,198 | 14,553 | 14,725 | 4.4 | % | 3.2 | % | ||||||
| National Accounts | 7,266 | 6,973 | 6,777 | 4.2 | % | 7.2 | % | ||||||
| BlueCard | 5,209 | 5,019 | 5,050 | 3.8 | % | 3.1 | % | ||||||
| Total National | 12,475 | 11,992 | 11,827 | 4.0 | % | 5.5 | % | ||||||
| Individual | 1,850 | 1,826 | 1,755 | 1.3 | % | 5.4 | % | ||||||
| Medicaid | 4,499 | 4,472 | 4,378 | 0.6 | % | 2.8 | % | ||||||
| Medicare | 1,379 | 1,426 | 1,441 | (3.3 | %) | (4.3 | %) | ||||||
| FEP | 1,543 | 1,540 | 1,527 | 0.2 | % | 1.0 | % | ||||||
| Total Medical Membership | 36,944 | 35,809 | 35,653 | 3.2 | % | 3.6 | % | ||||||
| Funding Arrangement | |||||||||||||
| Self-Funded | 22,630 | 20,172 | 20,294 | 12.2 | % | 11.5 | % | ||||||
| Fully-Insured | 14,314 | 15,637 | 15,359 | (8.5 | %) | (6.8 | %) | ||||||
| Total Medical Membership | 36,944 | 35,809 | 35,653 | 3.2 | % | 3.6 | % | ||||||
| Reportable Segment | |||||||||||||
| Commercial & Specialty Business | 29,523 | 28,371 | 28,307 | 4.1 | % | 4.3 | % | ||||||
| Government Business | 7,421 | 7,438 | 7,346 | (0.2 | %) | 1.0 | % | ||||||
| Total Medical Membership | 36,944 | 35,809 | 35,653 | 3.2 | % | 3.6 | % | ||||||
|
Other Membership & Customers |
|||||||||||||
| Behavioral Health Membership | 26,903 | 24,488 | 24,372 | 9.9 | % | 10.4 | % | ||||||
| Life and Disability Membership | 4,758 | 4,808 | 4,819 | (1.0 | %) | (1.3 | %) | ||||||
| Dental Membership | 4,966 | 4,913 | 4,895 | 1.1 | % | 1.5 | % | ||||||
| Managed Dental Membership | 4,849 | 4,897 | 4,886 | (1.0 | %) | (0.8 | %) | ||||||
| Vision Membership | 5,025 | 4,619 | 4,743 | 8.8 | % | 5.9 | % | ||||||
| Medicare Advantage Part D Membership | 653 | 608 | 628 | 7.4 | % | 4.0 | % | ||||||
| Medicare Part D Stand-Alone Membership | 469 | 485 | 474 | (3.3 | %) | (1.1 | %) | ||||||
| WellPoint, Inc. | |||||||||||
| Consolidated Statements of Income | |||||||||||
| (Unaudited) | |||||||||||
| Three Months Ended | |||||||||||
| (In millions, except per share data) | March 31 | ||||||||||
| 2014 | 2013 | Change | |||||||||
| Revenues | |||||||||||
| Premiums | $16,517.0 | $16,435.6 | 0.5 | % | |||||||
| Administrative fees | 1,118.3 | 990.1 | 12.9 | % | |||||||
| Other revenue | 9.5 | 9.4 | 1.1 | % | |||||||
| Total operating revenue | 17,644.8 | 17,435.1 | 1.2 | % | |||||||
| Net investment income | 183.7 | 162.0 | 13.4 | % | |||||||
| Net realized gains on investments | 41.7 | 16.8 | 148.2 | % | |||||||
| Other-than-temporary impairment losses on investments: | |||||||||||
| Total other-than-temporary impairment losses on investments | (10.8 | ) | (37.9 | ) | 71.5 | % | |||||
| Portion of other-than-temporary impairment losses recognized in | |||||||||||
| other comprehensive income | – | – | NM(2) | ||||||||
| Other-than-temporary impairment losses recognized in income | (10.8 | ) | (37.9 | ) | 71.5 | % | |||||
| Total revenues | 17,859.4 | 17,576.0 | 1.6 | % | |||||||
| Expenses | |||||||||||
| Benefit expense | 13,664.6 | 13,748.7 | (0.6 | %) | |||||||
| Selling, general and administrative expense | |||||||||||
| Selling expense | 370.8 | 385.9 | (3.9 | %) | |||||||
| General and administrative expense | 2,490.7 | 1,943.2 | 28.2 | % | |||||||
| Total selling, general and administrative expense | 2,861.5 | 2,329.1 | 22.9 | % | |||||||
| Interest expense | 146.2 | 153.5 | (4.8 | %) | |||||||
| Loss on extinguishment of debt | 3.0 | – | NM(2) | ||||||||
| Amortization of other intangible assets | 54.0 | 62.2 | (13.2 | %) | |||||||
| Total expenses | 16,729.3 | 16,293.5 | 2.7 | % | |||||||
| Income from continuing operations before income tax expense | 1,130.1 | 1,282.5 | (11.9 | %) | |||||||
| Income tax expense | 438.7 | 410.2 | 6.9 | % | |||||||
| Income from continuing operations | 691.4 | 872.3 | (20.7 | %) | |||||||
| Income from discontinued operations, net of tax (1) | 9.6 | 12.9 | (25.6 | %) | |||||||
| Net income | $701.0 | $885.2 | (20.8 | %) | |||||||
| Net income per diluted share | $2.40 | $2.89 | (17.0 | %) | |||||||
| Diluted shares | 292.6 | 305.9 | (4.3 | %) | |||||||
| Benefit expense as a percentage of premiums | 82.7 | % | 83.7 | % | (100) bp | ||||||
| Selling, general and administrative expense as a | |||||||||||
| percentage of total operating revenue | 16.2 | % | 13.4 | % | 280 bp | ||||||
| Income from continuing operations before income tax expense | |||||||||||
| as a percentage of total revenues | 6.3 | % | 7.3 | % | (100) bp | ||||||
|
(1) |
Results for 1-800 CONTACTS have been reclassified as discontinued operations under GAAP. | ||||||||||
|
(2) |
"NM" = calculation not meaningful | ||||||||||
| WellPoint, Inc. | ||||
| Consolidated Balance Sheets | ||||
| March 31, | December | |||
|
(In millions) |
2014 | 31, 2013 | ||
| (Unaudited) | ||||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $1,971.2 | $1,582.1 | ||
| Investments available-for-sale, at fair value: | ||||
| Fixed maturity securities | 18,004.0 | 17,038.2 | ||
| Equity securities | 1,963.5 | 1,735.5 | ||
| Other invested assets, current | 25.9 | 16.3 | ||
| Accrued investment income | 173.6 | 168.8 | ||
| Premium and self-funded receivables | 4,457.5 | 3,968.7 | ||
| Other receivables | 1,234.0 | 1,063.3 | ||
| Income taxes receivable | - | 235.7 | ||
| Securities lending collateral | 1,325.0 | 969.8 | ||
| Deferred tax assets, net | 234.5 | 383.0 | ||
| Other current assets | 2,417.6 | 1,677.5 | ||
| Assets held for sale | - | 906.9 | ||
| Total current assets | 31,806.8 | 29,745.8 | ||
| Long-term investments available-for-sale, at fair value: | ||||
| Fixed maturity securities | 502.4 | 449.9 | ||
| Equity securities | 31.0 | 31.3 | ||
| Other invested assets, long-term | 1,593.8 | 1,542.6 | ||
| Property and equipment, net | 1,811.7 | 1,801.5 | ||
| Goodwill | 16,916.7 | 16,917.2 | ||
| Other intangible assets | 8,387.3 | 8,441.0 | ||
| Other noncurrent assets | 635.8 | 645.2 | ||
| Total assets | $61,685.5 | $59,574.5 | ||
| Liabilities and shareholders' equity | ||||
| Liabilities | ||||
| Current liabilities: | ||||
| Policy liabilities: | ||||
| Medical claims payable | $6,707.1 | $6,127.2 | ||
| Reserves for future policy benefits | 65.7 | 63.1 | ||
| Other policyholder liabilities | 2,020.4 | 2,073.2 | ||
| Total policy liabilities | 8,793.2 | 8,263.5 | ||
| Unearned income | 1,073.0 | 822.7 | ||
| Accounts payable and accrued expenses | 4,113.1 | 3,426.3 | ||
| Income taxes payable | 97.7 | - | ||
| Security trades pending payable | 177.5 | 95.2 | ||
| Securities lending payable | 1,324.6 | 969.7 | ||
| Short-term borrowings | 590.0 | 400.0 | ||
| Current portion of long-term debt | 518.7 | 518.0 | ||
| Other current liabilities | 1,805.9 | 1,674.7 | ||
| Liabilities held for sale | - | 181.4 | ||
| Total current liabilities | 18,493.7 | 16,351.5 | ||
| Long-term debt, less current portion | 13,932.1 | 13,573.6 | ||
| Reserves for future policy benefits, noncurrent | 738.9 | 723.0 | ||
| Deferred tax liabilities, net | 3,343.1 | 3,325.2 | ||
| Other noncurrent liabilities | 832.4 | 836.0 | ||
| Total liabilities | 37,340.2 | 34,809.3 | ||
| Shareholders' equity | ||||
| Common stock | 2.9 | 2.9 | ||
| Additional paid-in capital | 10,003.5 | 10,765.2 | ||
| Retained earnings | 14,011.5 | 13,813.9 | ||
| Accumulated other comprehensive income | 327.4 | 183.2 | ||
| Total shareholders' equity | 24,345.3 | 24,765.2 | ||
| Total liabilities and shareholders' equity | $61,685.5 | $59,574.5 | ||
| WellPoint, Inc. | ||||||
| Consolidated Statements of Cash Flows | ||||||
| (Unaudited) | ||||||
| Three Months Ended March 31 | ||||||
| (In millions) | 2014 | 2013 | ||||
| Operating activities | ||||||
| Net income | $701.0 | $885.2 | ||||
| Adjustments to reconcile net income to net cash | ||||||
| provided by operating activities: | ||||||
| Net realized gains on investments | (41.7 | ) | (16.8 | ) | ||
| Other-than-temporary impairment losses recognized in income | 10.8 | 37.9 | ||||
| Loss on extinguishment of debt | 3.0 | – | ||||
| Gain on disposal of discontinued operations | (3.2 | ) | – | |||
| Loss on disposal of assets | 0.1 | 0.7 | ||||
| Deferred income taxes | 85.2 | 9.1 | ||||
| Amortization, net of accretion | 190.3 | 186.7 | ||||
| Depreciation expense | 26.4 | 25.3 | ||||
| Impairment of property and equipment | 2.1 | – | ||||
| Share-based compensation | 38.8 | 21.5 | ||||
| Excess tax benefits from share-based compensation | (22.4 | ) | (4.2 | ) | ||
| Changes in operating assets and liabilities, net of | ||||||
| effect of business combinations: | ||||||
| Receivables, net | (616.0 | ) | (397.7 | ) | ||
| Other invested assets | (14.6 | ) | (8.2 | ) | ||
| Other assets | (69.5 | ) | (58.6 | ) | ||
| Policy liabilities | 545.6 | 70.9 | ||||
| Unearned income | 250.0 | (31.1 | ) | |||
| Accounts payable and accrued expenses | (137.3 | ) | (224.0 | ) | ||
| Other liabilities | 107.4 | 35.1 | ||||
| Income taxes | 356.0 | 435.6 | ||||
| Other, net | (24.5 | ) | (10.5 | ) | ||
| Net cash provided by operating activities | 1,387.5 | 956.9 | ||||
| Investing activities | ||||||
| Purchases of fixed maturity securities | (3,084.8 | ) | (3,955.5 | ) | ||
| Proceeds from sales and maturities of fixed maturity securities | 2,345.5 | 3,022.6 | ||||
| Purchases of equity securities | (228.6 | ) | (29.2 | ) | ||
| Proceeds from sales of equity securities | 30.3 | 87.4 | ||||
| Purchases of other invested assets | (35.4 | ) | (127.5 | ) | ||
| Proceeds from sales of other invested assets | 25.6 | 7.6 | ||||
| Settlement of non-hedging derivatives | (46.2 | ) | (80.6 | ) | ||
| Changes in securities lending collateral | (354.9 | ) | (12.9 | ) | ||
| Proceeds from the sale of subsidiary, net of cash sold | 740.0 | – | ||||
| Purchases of property and equipment | (135.7 | ) | (107.5 | ) | ||
| Other, net | (0.1 | ) | – | |||
| Net cash used in investing activities | (744.3 | ) | (1,195.6 | ) | ||
| Financing activities | ||||||
| Net proceeds from commercial paper borrowings | 379.4 | 260.3 | ||||
| Net proceeds from short-term borrowings | 190.0 | 100.0 | ||||
| Repayments of long-term borrowings | (24.2 | ) | (556.9 | ) | ||
| Changes in securities lending payable | 354.9 | 12.8 | ||||
| Changes in bank overdrafts | 75.0 | 30.4 | ||||
| Repurchase and retirement of common stock | (1,262.8 | ) | (340.2 | ) | ||
| Cash dividends | (123.4 | ) | (113.4 | ) | ||
| Proceeds from issuance of common stock under employee stock plans | 130.1 | 23.7 | ||||
| Excess tax benefits from share-based compensation | 22.4 | 4.2 | ||||
| Net cash used in financing activities | (258.6 | ) | (579.1 | ) | ||
| Effects of foreign currency exchange rate changes on cash | ||||||
| and cash equivalents | (0.3 | ) | (1.5 | ) | ||
| Change in cash and cash equivalents | 384.3 | (819.3 | ) | |||
| Cash and cash equivalents at beginning of year | 1,586.9 | 2,484.6 | ||||
| Cash and cash equivalents at end of period | 1,971.2 | 1,665.3 | ||||
| Less: cash and cash equivalents of discontinued operations at end of period | – | (5.7 | ) | |||
| Cash and cash equivalents of continuing operations at end of period | $1,971.2 | $1,659.6 | ||||
| WellPoint, Inc. | |
| GAAP Reconciliation | |
| (Unaudited) | |
| WellPoint, Inc. has referenced "Adjusted Net Income," "Adjusted Net Income Per Share," "Operating Revenue," and "Operating Gain" non-GAAP measures in this document. These non-GAAP measures are not intended to be alternatives to any measure calculated in accordance with GAAP. Rather, these non-GAAP measures are provided to further aid investors in understanding and analyzing the company's core operating results and comparing WellPoint, Inc.'s financial results. A reconciliation of these measures to the most directly comparable measures calculated in accordance with GAAP is presented below. | |
| Three Months Ended | ||||||||||||
| (In millions, except per share data) | March 31, 2014 | March 31, 2013 | Change | |||||||||
| Net income | $701.0 | $885.2 | (20.8 | %) | ||||||||
| Add / (Subtract) - net of related tax effects: | ||||||||||||
| Net realized gains on investments | (27.1 | ) | (10.9 | ) | ||||||||
| Other-than-temporary impairment losses on investments | 7.0 | 24.6 | ||||||||||
| Loss on extinguishment of debt | 2.0 | – | ||||||||||
| 1-800 CONTACTS 2014 income | (9.6 | ) | – | |||||||||
| Net adjustment items | (27.7 | ) | 13.7 | |||||||||
| Adjusted net income | $673.3 | $898.9 | (25.1 | %) | ||||||||
| Net income per diluted share | $2.40 | $2.89 | (17.0 | %) | ||||||||
| Add / (Subtract) - net of related tax effects: | ||||||||||||
| Net realized gains on investments | (0.09 | ) | (0.04 | ) | ||||||||
| Other-than-temporary impairment losses on investments | 0.02 | 0.08 | ||||||||||
| Loss on extinguishment of debt | 0.01 | – | ||||||||||
| 1-800 CONTACTS 2014 income | (0.03 | ) | – | |||||||||
| Rounding impact | (0.01 | ) | 0.01 | |||||||||
| Net adjustment items | (0.10 | ) | 0.05 | |||||||||
| Adjusted net income per diluted share | $2.30 | $2.94 | (21.8 | %) | ||||||||
| Full Year 2014 | ||||||||||||
| Outlook | ||||||||||||
| Net income per diluted share | Greater than $8.50 | |||||||||||
| Add / (Subtract) - net of related tax effects: | ||||||||||||
| Net realized gains on investments | (0.09 | ) | ||||||||||
| Other-than-temporary impairment losses on investments | 0.02 | |||||||||||
| Loss on extinguishment of debt | 0.01 | |||||||||||
| 1-800 CONTACTS 2014 income | (0.03 | ) | ||||||||||
| Rounding impact | (0.01 | ) | ||||||||||
| Net adjustment items | (0.10 | ) | ||||||||||
| Adjusted net income per diluted share | Greater than $8.40 | |||||||||||
|
Three Months Ended |
||||||||||||
| (In millions) | 2014 | 2013 | ||||||||||
| Reportable segments operating revenues | $17,644.8 | $17,435.1 | ||||||||||
| Net investment income | 183.7 | 162.0 | ||||||||||
| Net realized gains on investments | 41.7 | 16.8 | ||||||||||
| Other-than-temporary impairment losses recognized in income | (10.8 | ) | (37.9 | ) | ||||||||
| Total revenues | $17,859.4 | $17,576.0 | ||||||||||
|
Three Months Ended |
||||||||||||
| (In millions) | 2014 | 2013 | ||||||||||
| Reportable segments operating gain | $1,118.7 | $1,357.3 | ||||||||||
| Net investment income | 183.7 | 162.0 | ||||||||||
| Net realized gains on investments | 41.7 | 16.8 | ||||||||||
| Other-than-temporary impairment losses recognized in income | (10.8 | ) | (37.9 | ) | ||||||||
| Interest expense | (146.2 | ) | (153.5 | ) | ||||||||
| Amortization of other intangible assets | (54.0 | ) | (62.2 | ) | ||||||||
| Loss on extinguishment of debt | (3.0 | ) | — | |||||||||
| Income from continuing operations before income tax expense | $1,130.1 | $1,282.5 | ||||||||||
| WellPoint, Inc. | ||||||||||||||
| Reclassified Reportable Segment Highlights | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||
| March 31, 2013 | June 30, 2013 | September 30, 2013 | December 31, 2013 | |||||||||||
| Operating Revenue (in millions) | ||||||||||||||
| Commercial and Specialty Business | $9,859.4 | $9,799.8 | $9,833.3 | $9,911.7 | ||||||||||
| Government Business | 7,569.4 | 7,686.9 | 7,772.6 | 7,723.7 | ||||||||||
| Other | 6.3 | 5.2 | 12.8 | 10.3 | ||||||||||
| Total Operating Revenue | 17,435.1 | 17,491.9 | 17,618.7 | 17,645.7 | ||||||||||
| Operating Gain / (Loss) (in millions) | ||||||||||||||
| Commercial and Specialty Business | $1,262.1 | $948.5 | $711.7 | $254.1 | ||||||||||
| Government Business | 102.6 | 281.3 | 294.6 | 165.5 | ||||||||||
| Other | (7.4 | ) | (6.1 | ) | (5.3 | ) | (0.2 | ) | ||||||
| Total Operating Gain | 1,357.3 | 1,223.7 | 1,001.0 | 419.4 | ||||||||||
| Operating Margin | ||||||||||||||
| Commercial and Specialty Business | 12.8 | % | 9.7 | % | 7.2 | % | 2.6 | % | ||||||
| Government Business | 1.4 | % | 3.7 | % | 3.8 | % | 2.1 | % | ||||||
| Total Operating Margin | 7.8 | % | 7.0 | % | 5.7 | % | 2.4 | % | ||||||
| Medical Membership (in thousands) | ||||||||||||||
| Commercial and Specialty Business | 28,371 | 28,246 | 28,216 | 28,307 | ||||||||||
| Government Business | 7,438 | 7,420 | 7,292 | 7,346 | ||||||||||
| Total Medical Membership | 35,809 | 35,666 | 35,508 | 35,653 | ||||||||||
| Year Ended | Year Ended | |||||||||||||
| December 31, 2012 | December 31, 2013 | |||||||||||||
| Operating Revenue (in millions) | ||||||||||||||
| Commercial and Specialty Business | $39,639.8 | $39,404.2 | ||||||||||||
| Government Business | 20,838.9 | 30,752.6 | ||||||||||||
| Other | 35.3 | 34.6 | ||||||||||||
| Total Operating Revenue | 60,514.0 | 70,191.4 | ||||||||||||
| Operating Gain / (Loss) (in millions) | ||||||||||||||
| Commercial and Specialty Business | $3,396.1 | $3,176.4 | ||||||||||||
| Government Business | 285.4 | 844.0 | ||||||||||||
| Other | (61.6 | ) | (19.0 | ) | ||||||||||
| Total Operating Gain | 3,619.9 | 4,001.4 | ||||||||||||
| Operating Margin | ||||||||||||||
| Commercial and Specialty Business | 8.6 | % | 8.1 | % | ||||||||||
| Government Business | 1.4 | % | 2.7 | % | ||||||||||
| Total Operating Margin | 6.0 | % | 5.7 | % | ||||||||||
| Medical Membership (in thousands) | ||||||||||||||
| Commercial and Specialty Business | 28,552 | 28,307 | ||||||||||||
| Government Business | 7,578 | 7,346 | ||||||||||||
| Total Medical Membership | 36,130 | 35,653 | ||||||||||||
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
WellPoint and its representatives may from time to time make written and oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA), including statements in this press release, in presentations, filings with the Securities and Exchange Commission, or SEC, reports to shareholders and in meetings with analysts and investors. The projections referenced in this press release are forward-looking and they are intended to be covered by the safe harbor for “forward-looking statements” provided by PSLRA. Words such as “expect(s)”, “feel(s)”, “believe(s)”, “will”, “may”, “anticipate(s)”, “intend”, “estimate”, “project” and similar expressions are intended to identify forward-looking statements, which generally are not historical in nature. 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 information and statements. These risks and uncertainties include: those discussed and identified in our public filings with the 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 (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 the federal and state health insurance exchanges under Health Care Reform, which have experienced technical difficulties in implementation 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; our ability to contract with providers consistent with past practice; 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; litigation and investigations targeted at our industry and our ability to resolve litigation and investigations within estimates; 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 and e-business organization and to maintain good relationships with party vendors for information system resources; events that may negatively affect our licenses with the Blue Cross and Blue Shield Association; 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 sensitive or confidential information; changes in the 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 and acquisitions; 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. Except to the extent otherwise required by federal securities law, we do not undertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures in our SEC reports.
WellPoint Contacts:
Investor Relations
Doug
Simpson, 317-488-6181
or
Media
Kristin
Binns, 917-697-7802
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