Against the backdrop of the ongoing pandemic, Anthem, Inc.
(NYSE: ANTM) has continued to take bold steps to directly support
its health plan members, customers, care providers, associates, and
local communities.
"During these uncertain times, our business has continued to
adapt and respond to the needs of those we serve in light of
COVID-19 and the important discussions around health disparities
and racial injustice facing our society. Now more than ever, our
members, customers, and local communities are looking to us for
support and I am honored by the trust they have placed in us," said
President and CEO Gail K. Boudreaux. "Together, with our more than
78,000 associates, Anthem is guided by our mission of improving
lives and building a better and healthier America."
Anthem has been, and always will be, deeply connected and
committed to our local communities. In addition to providing $2.5
billion of financial assistance to ease the burden of the COVID-19
pandemic, Anthem pledged $50 million over the next five years to
focus directly on addressing health disparities, racial inequities,
and the key drivers of health such as food insecurity, mental
health, housing, and economic recovery.
As part of Anthem's efforts to combat the global pandemic,
address health inequities, and adapt to the ever-changing
healthcare environment, the Company has remained focused on
fostering deeper relationships and developing innovative solutions
to meet critical needs for its stakeholders. Actions taken to
support our members, customers, care providers and local
communities include:
Care for our Anthem associates
- Deployed business continuity plans and
transitioned nearly all of our associates to work from home while
maintaining service operations.
- Waived one month of premium costs for
associates enrolled in an Anthem health plan.
- Expanded associate benefits to provide
additional support, including providing up to 80 hours of
additional paid leave, reimbursement of installation and monthly
internet service fees for hourly associates, and offering virtual
wellbeing resources.
- Ensuring our frontline medical staff are
following CDC guidelines and are provided with the proper equipment
and supplies to minimize risk to themselves and patients.
Care for our consumers, customers, and
providers
- Waived all cost-sharing for COVID-19
diagnostic tests and treatment through December 31, 2020.
- Increased access to virtual care and
waived cost-sharing for telehealth and phone visits, including
those for mental health, through September 30, 2020.
- Relaxed early prescription refill
policies for maintenance and specialty medications.
- Provided a one-month premium credit to
members enrolled in select individual plans and fully insured
employer group customers ranging from 10 to 15 percent of monthly
premium.
- Provided a one-month 50 percent premium
credit to individuals in standalone and group dental plans.
- Offering enhanced flexibility with regard
to premium payments to eligible employer groups.
- Working with providers to accelerate
claims processing, resolving claims, and accelerating payments to
support state-specific Medicaid programs.
- Providing financial assistance to care
provider partners facing undue financial pressure and to support
ramping up telehealth capabilities and the cost of PPE.
- Offering in-network dental providers a
$10 PPE credit per patient, per visit through the end of August
2020.
- Suspended select prior authorization
requirements.
- Deployed C19 Explorer, a digital tool
that aggregates real-time COVID-19 data to present trends and
predictions for communities across the nation to assess readiness
to reopen, plan next steps, and respond to potential changes.
- Deployed C19 Navigator, a dashboard
solution designed for Anthem employer customers to help inform
workplace decisions and resource planning with employee-level
data.
- Launched Passport, powered by doc.ai, an
app that empowers employers to minimize risk and support safer
entry into the workplace by verifying their employees' health
status. The app evaluates possible COVID-19 symptoms through daily
attestations.
- Opened hundreds of digital solutions
kiosks in health centers across California to provide real-time
video interpretation services and access to telehealth.
- Introduced the Anthem Skill to members of
our commercial medical and dental health plans. Through an
Alexa-enabled device, members can use the Anthem Skill to take
actions such as order prescriptions and quickly access some of
their health and dental plan benefit information.
- Deployed a Coronavirus Assessment tool
within our Sydney Care app to help people quickly and safely
evaluate symptoms, assess their risk of having COVID-19, and
connect directly to a board-certified doctor via text or
video.
- Deployed Serenity, a free chatbot
companion offered by doc.ai, providing expert and confidential
mental health counseling through AI.
- Facilitating connections with Medicaid
beneficiaries and state and social services, helping newly eligible
and at risk members enroll in the Supplemental Nutrition Assistance
Program (SNAP) and Special Supplemental Nutrition Program for
Women, Infants, and Children (WIC).
- Outreach to Medicare Advantage and
Medicaid consumers to make sure they have necessary medications on
hand, their nutritional needs are being met, and critical health
needs are addressed.
- Recruiting and expediting the onboarding
of care providers interested in providing telehealth services to
members.
- Providing resources to support the whole
health needs of members, including resources to manage social
isolation, job loss, food insecurity and stress.
Care for our communities
- Committed $50 million from the Anthem
Foundation for COVID-19 response and recovery efforts to help areas
of greatest need, including care provider safety, food insecurity,
and mental and behavioral health resources.
- In collaboration with Gleaners Food Bank,
we are working to provide more than 10 million meals in our home
city of Indianapolis by providing a $1 million matching grant to
fight food insecurity and expand access to nutritious food.
- Partnered with NYC-based Coalition of
Asian-American IPA, an independent practice association with over
1,000 private practice providers, to provide free mobile testing
across NYC while increasing access to testing in many other markets
across the U.S.
- Partnered with ConvenientMD to provide
drive-up testing services in Maine and New Hampshire.
- Providing virtual volunteer
opportunities, such as remote teaching or mailing cards to seniors
facing loneliness, to help associates safely give back to
communities.
- Provided funding to support COVID-19
testing infrastructure for community health centers in Ohio.
- Contributed $1 million to the newly
created Rapid Response Loan Fund established by the Indianapolis
Chamber of Commerce to provide critical funding for nearly 43
thousand small businesses in Central Indiana.
- Anthem and the Anthem Foundation are
founding anchor partners of XPRIZE Rapid COVID Testing, a
collaboration with XPRIZE, OpenCovidScreen, and other Blue Cross
and Blue Shield plans and innovative organizations to launch a $5
million competition to accelerate the development of high-quality
COVID-19 testing that is low cost, easy to use, and
quick-reporting, paving the way for more frequent testing.
Additional actions to support society
- Pledged $50 million over the next 5 years
focused on directly impacting racial injustice, strengthening our
communities, and addressing health inequities.
- Contributed to the Central Indiana Racial
Equity Fund in support of organizations focused on having difficult
conversations about Indiana's and the Nation's complicated past;
building additional capacity within the nonprofit sector to address
issues of inequality, in particular relating to the criminal
justice system; and advancing effective, data-driven solutions at
the local level.
- Joined the UN Global Compact (UNGC), the
world's largest corporate sustainability initiative and a call to
companies to align with universal principles on human rights,
labor, environment, and anti-corruption, and take actions that
advance societal roles.
CONSOLIDATED HIGHLIGHTS
Earnings Per Share: GAAP net income was $8.91 per share
in the quarter, including net negative adjustment items of $0.29
per share. Adjusted net income was $9.20* per share.
*Please refer to the GAAP reconciliation
tables.
Membership: Medical enrollment totaled 42.5 million
members at June 30, 2020, an increase of 309 thousand lives, or 0.7
percent, compared to March 31, 2020. The increase was driven by our
Government Business, which grew by 599 thousand lives during the
quarter, attributable to Medicaid, reflecting organic growth as a
result of the temporary suspension of eligibility recertification
efforts in our markets, and Medicare Advantage. The increase was
partially offset by Commercial & Specialty Business enrollment,
which declined by 290 thousand lives driven by higher in-group
change as a result of the higher unemployment rate.
Medical enrollment increased by 1.6 million lives, or 3.9
percent compared to the prior year quarter, reflecting growth in
the Medicaid, National, and Medicare businesses. Growth in Medicaid
was driven by organic growth in our markets as well as our
acquisition of the plans in Missouri and Nebraska. The increase in
National enrollment reflects growth due to higher BlueCard activity
and the acquisition of AmeriBen in the first quarter of 2020.
Operating Revenue: Operating revenue was $29.2 billion in
the second quarter of 2020, an increase of $4 billion, or 15.9
percent, versus the prior year quarter, driven by pharmacy product
revenue related to the launch of IngenioRx. The increase was
further attributable to higher premium revenue due to growth in
Medicaid and Medicare and the return of the health insurance tax in
2020, partially offset by a decrease in experience-rated premiums
in our Federal Health Products & Services business.
Benefit Expense Ratio: The benefit expense ratio was 77.9
percent in the second quarter of 2020, a decrease of 880 basis
points from 86.7 percent in the prior year quarter. The decrease
was primarily driven by the deferral of healthcare utilization due
to the COVID-19 pandemic, and to a lesser extent, the return of the
health insurance tax in 2020. The decrease was partially offset by
premium credits provided to members enrolled in select employer
group and Individual plans.
Medical claims reserves established at December 31, 2019
developed in line with the Company’s expectations during the second
quarter of 2020.
Days in Claims Payable: Days in Claims Payable was 46.0
days as of June 30, 2020, an increase of 4.1 days from March 31,
2020.
SG&A Expense Ratio: The SG&A expense ratio was
13.9 percent in the second quarter of 2020, an increase of 90 basis
points from 13.0 percent in the second quarter of 2019, primarily
driven by the return of the health insurance tax in 2020 and
increased spend to support growth, partially offset by growth in
operating revenue.
Operating Cash Flow: Operating cash flow was $5.5
billion, or 2.4 times net income in the second quarter of 2020, an
increase of $4.1 billion compared to the prior year quarter,
primarily driven by growth in net income and the delayed payment of
certain federal income and payroll taxes in accordance with the
CARES Act. The increase was further attributable to growth in
premium revenue due to the return of the health insurance tax in
2020.
Share Repurchase Program: After careful consideration of
the Company's financial position in conjunction with the prevailing
market conditions, share repurchase activity resumed in late-June.
During the second quarter of 2020, the Company repurchased 213
thousand shares of its common stock for $55 million, or a weighted
average price of $258.77. Year to date, the Company has repurchased
2.1 million shares for $584 million, or a weighted average price of
$273.72.
As of June 30, 2020, the Company had approximately $3.2 billion
of Board-approved share repurchase authorization remaining.
Cash Dividend: During the second quarter of 2020, the
Company paid a quarterly dividend of $0.95 per share, representing
a distribution of cash totaling $242 million.
On July 28, 2020, the Audit Committee declared a third quarter
2020 dividend to shareholders of $0.95 per share. On an annualized
basis, this equates to a dividend of $3.80 per share. The third
quarter dividend is payable on September 25, 2020 to shareholders
of record at the close of business on September 10, 2020.
Investment Portfolio & Capital Position: During the
second quarter of 2020, the Company recorded net realized gains of
$18 million and impairment recoveries totaling $11 million. During
the second quarter of 2019, the Company recorded net realized gains
of $11 million and impairment losses totaling $7 million.
As of June 30, 2020, the Company’s net unrealized loss position
in the investment portfolio was $713 million, consisting of fixed
maturity securities. As of June 30, 2020 cash and investments at
the parent company totaled approximately $4.1 billion.
REPORTABLE SEGMENTS
Effective January 1, 2020, Anthem, Inc. has four reportable
segments: Commercial & Specialty Business (comprised of the
Local Group, National Accounts, Individual and Specialty
businesses); Government Business (comprised of the Medicaid,
Medicare, and Federal Health Products & Services businesses);
IngenioRx, and Other (comprised of the Diversified Business Group
and corporate expenses not allocated to our other reportable
segments).
Anthem, Inc.
Reportable Segment
Highlights
(Unaudited)
(In millions)
Three Months Ended June 30
Six Months Ended June 30
2020
2019
Change
2020
2019
Change
Operating Revenue
Commercial & Specialty Business
$8,789
$9,417
(6.7
)%
$18,150
$18,809
(3.5
)%
Government Business
17,242
15,538
11.0
%
34,708
30,464
13.9
%
IngenioRx
5,269
248
NM2
10,466
248
NM2
Other
1,452
546
165.9
%
2,479
1,094
126.6
%
Eliminations
(3,574)
(572)
NM2
(7,177)
(1,050)
NM2
Total Operating Revenue1
$29,178
$25,177
15.9
%
$58,626
$49,565
18.3
%
Operating Gain / (Loss)
Commercial & Specialty Business
$1,372
$983
39.6
%
$2,792
$2,581
8.2
%
Government Business
1,618
480
237.1
%
2,029
854
137.6
%
IngenioRx
304
—
NM2
653
—
NM2
Other
66
(30)
NM2
80
(62)
NM2
Total Operating Gain1
$3,360
$1,433
134.5
%
$5,554
$3,373
64.7
%
Operating Margin
Commercial & Specialty Business
15.6
%
10.4
%
520 bp
15.4
%
13.7
%
170 bp
Government Business
9.4
%
3.1
%
630 bp
5.8
%
2.8
%
300 bp
IngenioRx
5.8
%
—
NM2
6.2
%
—
%
NM2
Total Operating Margin1
11.5
%
5.7
%
580 bp
9.5
%
6.8
%
270 bp
(1) See “Basis of Presentation”
herein.
(2) "NM" = calculation not meaningful.
Commercial & Specialty Business: Operating gain in
the Commercial & Specialty Business segment totaled $1,372
million in the second quarter of 2020, an increase of $389 million,
or 39.6 percent, from $983 million in the second quarter of 2019.
The increase is primarily attributable to reduced healthcare
benefit utilization during the COVID-19 pandemic. The increase was
partially offset by premium credits provided to members enrolled in
select employer group and Individual health plans, less favorable
adjustments to our risk adjustor estimates, as well as the shift of
pharmacy earnings to the IngenioRx segment.
Government Business: Operating gain in the Government
Business segment was $1,618 million in the second quarter of 2020,
an increase of $1,138 million, or 237.1 percent, from $480 million
in the second quarter of 2019. The increase is primarily
attributable to reduced healthcare benefit utilization during the
COVID-19 pandemic, partially offset by experience-rated refunds and
retroactive rate adjustments in Medicaid.
IngenioRx: IngenioRx commenced operations in the second
quarter of 2019 and the transition of membership was completed on
January 1, 2020. Operating gain was $304 million in the second
quarter of 2020.
Other: The Company reported an operating gain of $66
million in the Other segment for the second quarter of 2020,
compared with an operating loss of $30 million in the prior year
quarter. The increase was driven by growth in the Diversified
Business Group.
OUTLOOK
Full Year 2020:
- GAAP net income is expected to be greater than $20.91 per
share, including approximately $1.39 per share of net unfavorable
items. Excluding these items, adjusted net income is expected to be
greater than $22.30* per share.
Due to unprecedented uncertainty around the COVID-19 pandemic
and its impact, the Company is not providing other financial
guidance metrics for 2020 until visibility improves.
* Refer to the GAAP reconciliation
tables.
Basis of Presentation
- 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, cost of
products sold 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.
- Operating margin is defined as operating gain divided by
operating revenue.
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 second
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:
800-857-9605 (Domestic)
800-568-6411 (Domestic Replay)
203-827-7032 (International)
203-369-3291 (International Replay)
The access code for today's conference call is 1623092.
The replay will be available from 11:30 a.m. EDT today, until the
end of the day on August 29, 2020. 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 a leading health benefits company dedicated to
improving lives and communities, and making healthcare simpler.
Through its affiliated companies, Anthem serves more than 106
million people, including more than 42 million within its family of
health plans. We aim to be the most innovative, valuable and
inclusive partner. For more information, please visit www.antheminc.com or follow @AnthemInc on
Twitter.
Anthem, Inc.
Membership Summary
(Unaudited and in Thousands)
Change from
Medical
Membership
June 30, 2020
June 30, 2019
March 31, 2020
June 30, 2019
March 31, 2020
Customer Type
Local Group
15,616
15,670
15,848
(0.3
)%
(1.5
)%
Individual
711
741
717
(4.0
)%
(0.8
)%
National:
National Accounts
7,872
7,693
7,898
2.3
%
(0.3
)%
BlueCard®
6,171
6,009
6,197
2.7
%
(0.4
)%
Total National
14,043
13,702
14,095
2.5
%
(0.4
)%
Medicare:
Medicare Advantage
1,366
1,170
1,341
16.8
%
1.9
%
Medicare Supplement
921
877
914
5.0
%
0.8
%
Total Medicare
2,287
2,047
2,255
11.7
%
1.4
%
Medicaid
8,180
7,099
7,615
15.2
%
7.4
%
Federal Employees Health Benefits
1,616
1,593
1,614
1.4
%
0.1
%
Total Medical Membership
42,453
40,852
42,144
3.9
%
0.7
%
Funding Arrangement
Self-Funded
25,888
25,433
26,120
1.8
%
(0.9
)%
Fully-Insured
16,565
15,419
16,024
7.4
%
3.4
%
Total Medical Membership
42,453
40,852
42,144
3.9
%
0.7
%
Reportable Segment
Commercial & Specialty Business
30,370
30,113
30,660
0.9
%
(0.9
)%
Government Business
12,083
10,739
11,484
12.5
%
5.2
%
Total Medical Membership
42,453
40,852
42,144
3.9
%
0.7
%
Other
Membership
Life and Disability Members
5,110
4,906
5,158
4.2
%
(0.9
)%
Dental Members
6,096
5,931
6,172
2.8
%
(1.2
)%
Dental Administration Members
1,318
5,523
1,311
(76.1
)%
0.5
%
Vision Members
7,457
7,161
7,510
4.1
%
(0.7
)%
Medicare Part D Standalone Members
392
287
383
36.6
%
2.3
%
Anthem, Inc.
Consolidated Statements of
Income
(Unaudited)
(In millions, except per share data)
Three Months Ended June 30
2020
2019
Change
Revenues
Premiums
$
25,092
$
23,501
6.8
%
Product revenue
2,543
144
NM
Administrative fees and other revenue
1,543
1,532
0.7
%
Total operating revenue
29,178
25,177
15.9
%
Net investment income
57
285
(80.0
)%
Net realized gains on financial
instruments
18
11
63.6
%
Impairment recoveries (losses) on
investments:
Total impairment recoveries (losses) on
investments
6
(9
)
NM
Portion of impairment losses recognized in
other comprehensive income
5
2
150.0
%
Impairment recoveries (losses) recognized
in income
11
(7
)
NM
Total revenues
29,264
25,466
14.9
%
Expenses
Benefit expense
19,547
20,368
(4.0
)%
Cost of products sold
2,225
98
NM
Selling, general and administrative
expense
4,046
3,278
23.4
%
Interest expense
201
184
9.2
%
Amortization of other intangible
assets
93
85
9.4
%
Loss on extinguishment of debt
3
—
NM
Total expenses
26,115
24,013
8.8
%
Income before income tax expense
3,149
1,453
116.7
%
Income tax expense
873
314
178.0
%
Net income
$
2,276
$
1,139
99.8
%
Net income per diluted share
$
8.91
$
4.36
104.4
%
Diluted shares
255.4
261.0
(2.1
)%
Benefit expense as a percentage of
premiums
77.9
%
86.7
%
(880
)bp
Selling, general and administrative
expense as a percentage of total operating revenue
13.9
%
13.0
%
90
bp
Income before income taxes as a percentage
of total revenue
10.8
%
5.7
%
510
bp
"NM" = calculation not meaningful
Anthem, Inc.
Consolidated Statements of
Income
(Unaudited)
(In millions, except per share data)
Six Months Ended June 30
2020
2019
Change
Revenues
Premiums
$
50,609
$
46,344
9.2
%
Product revenue
4,887
144
NM
Administrative fees and other revenue
3,130
3,077
1.7
%
Total operating revenue
58,626
49,565
18.3
%
Net investment income
311
495
(37.2
)%
Net realized (losses) gains on financial
instruments
(6
)
89
NM
Impairment losses on investments:
Total impairment losses on investments
(95
)
(22
)
NM
Portion of impairment losses recognized in
other comprehensive income
49
5
880.0
%
Impairment losses recognized in income
(46
)
(17
)
NM
Total revenues
58,885
50,132
17.5
%
Expenses
Benefit expense
41,036
39,650
3.5
%
Cost of products sold
4,209
98
NM
Selling, general and administrative
expense
7,827
6,444
21.5
%
Interest expense
395
371
6.5
%
Amortization of other intangible
assets
176
172
2.3
%
Loss (gain) on extinguishment of debt
4
(1
)
NM
Total expenses
53,647
46,734
14.8
%
Income before income tax expense
5,238
3,398
54.1
%
Income tax expense
1,439
708
103.2
%
Net income
$
3,799
$
2,690
41.2
%
Net income per diluted share
$
14.85
$
10.28
44.5
%
Diluted shares
255.9
261.6
(2.2
)%
Benefit expense as a percentage of
premiums
81.1
%
85.6
%
(450
)bp
Selling, general and administrative
expense as a percentage of total operating revenue
13.4
%
13.0
%
40
bp
Income before income taxes as a percentage
of total revenue
8.9
%
6.8
%
210
bp
"NM" = calculation not meaningful
Anthem, Inc.
Consolidated Balance
Sheets
(In millions)
June 30, 2020
December 31, 2019
Assets
(Unaudited)
Current assets:
Cash and cash equivalents
$
6,028
$
4,937
Fixed maturity securities, current
22,018
19,676
Equity securities, current
3,470
1,009
Premium receivables
5,456
5,014
Self-funded receivables
2,460
2,570
Other receivables
3,072
2,807
Other current assets
4,260
3,020
Total current assets
46,764
39,033
Long-term investments:
Fixed maturity securities
520
505
Other invested assets
4,097
4,258
Property and equipment, net
3,427
3,133
Goodwill
21,641
20,500
Other intangible assets
9,577
8,674
Other noncurrent assets
1,950
1,350
Total assets
$
87,976
$
77,453
Liabilities and shareholders’
equity
Liabilities
Current liabilities:
Medical claims payable
$
9,878
$
8,842
Other policyholder liabilities
3,586
3,050
Unearned income
946
1,017
Accounts payable and accrued expenses
5,257
4,198
Short-term borrowings
—
700
Current portion of long-term debt
1,603
1,598
Other current liabilities
7,252
4,127
Total current liabilities
28,522
23,532
Long-term debt, less current portion
19,873
17,787
Reserves for future policy benefits
776
759
Deferred tax liabilities, net
2,497
2,227
Other noncurrent liabilities
1,853
1,420
Total liabilities
53,521
45,725
Shareholders’ equity
Common stock
3
3
Additional paid-in capital
9,360
9,448
Retained earnings
25,346
22,573
Accumulated other comprehensive loss
(254
)
(296
)
Total shareholders’ equity
34,455
31,728
Total liabilities and shareholders’
equity
$
87,976
$
77,453
Anthem, Inc.
Consolidated Statements of
Cash Flows
(Unaudited)
(In millions)
Six Months Ended June 30
2020
2019
Operating activities
Net income
$3,799
$2,690
Adjustments to reconcile net income to net
cash provided by operating activities:
Net realized losses (gains) on financial
instruments
6
(89
)
Depreciation and amortization
556
586
Deferred income taxes
60
79
Share-based compensation
134
140
Changes in operating assets and
liabilities:
Receivables, net
(313
)
(589
)
Other invested assets
24
(28
)
Other assets
(486
)
(258
)
Policy liabilities
1,024
1,251
Unearned income
(110
)
(2
)
Accounts payable and other liabilities
1,868
(383
)
Income taxes
1,313
(286
)
Other, net
150
(44
)
Net cash provided by operating
activities
8,025
3,067
Investing activities
Purchases of investments
(11,135
)
(11,113
)
Proceeds from sale of investments
4,724
8,835
Maturities, calls and redemptions from
investments
1,836
894
Purchases of subsidiaries, net of cash
acquired
(1,906
)
—
Purchases of property and equipment
(437
)
(455
)
Other, net
(800
)
22
Net cash used in investing activities
(7,718
)
(1,817
)
Financing activities
Net (repayments of) proceeds from
commercial paper borrowings
(400
)
203
Net repayments of short-term
borrowings
(700
)
(135
)
Net proceeds from (repayments of)
long-term borrowings
2,329
(73
)
Repurchase and retirement of common
stock
(584
)
(752
)
Cash dividends
(482
)
(412
)
Proceeds from issuance of common stock
under employee stock plans
92
100
Taxes paid through withholding of common
stock under employee stock plans
(111
)
(80
)
Other, net
640
43
Net cash provided by (used in) financing
activities
784
(1,106
)
Change in cash and cash equivalents
1,091
144
Cash and cash equivalents at beginning of
year
4,937
3,934
Cash and cash equivalents at end of
period
$6,028
$4,078
Anthem, Inc.
Reconciliation of Medical
Claims Payable
Six Months Ended June 30
Years Ended December 31
2020
2019
2019
2018
2017
(In millions)
(Unaudited)
(Unaudited)
Gross medical claims payable, beginning of
period
$
8,647
$
7,266
$
7,266
$
7,814
$
7,656
Ceded medical claims payable, beginning of
period
(33
)
(34
)
(34
)
(105
)
(539
)
Net medical claims payable, beginning of
period
8,614
7,232
7,232
7,709
7,117
Business combinations and purchase
adjustments
339
—
—
199
76
Net incurred medical claims:
Current year
39,978
38,237
78,695
69,581
70,377
Prior years redundancies(1)
(700
)
(414
)
(500
)
(930
)
(1,133
)
Total net incurred medical claims
39,278
37,823
78,195
68,651
69,244
Net payments attributable to:
Current year medical claims
31,625
30,367
70,294
62,748
62,923
Prior years medical claims
7,041
6,182
6,519
6,579
5,805
Total net payments
38,666
36,549
76,813
69,327
68,728
Net medical claims payable, end of
period
9,565
8,506
8,614
7,232
7,709
Ceded medical claims payable, end of
period
90
43
33
34
105
Gross medical claims payable, end of
period
$
9,655
$
8,549
$
8,647
$
7,266
$
7,814
Current year medical claims paid as a
percentage of current year net incurred medical claims
79.1
%
79.4
%
89.3
%
90.2
%
89.4
%
Prior year redundancies in the current
year as a percentage of prior year net medical claims payable less
prior year redundancies in the current year
8.8
%
6.1
%
7.4
%
13.7
%
18.9
%
Prior year redundancies in the current
year as a percentage of prior year net incurred medical claims
0.9
%
0.6
%
0.7
%
1.3
%
1.8
%
(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 June 30
Six Months Ended June 30
(In millions, except per share data)
2020
2019
Change
2020
2019
Change
Net income
$
2,276
$
1,139
99.8
%
$
3,799
$
2,690
41.2
%
Add / (Subtract):
Net realized (gains) losses on financial
instruments
(18
)
(11
)
6
(89
)
Amortization of other intangible
assets
93
85
176
172
Impairment (recoveries) losses recognized
in income
(11
)
7
46
17
Loss (gain) on extinguishment of debt
3
—
4
(1
)
Transaction and integration related
costs
11
5
23
5
Litigation expenses
21
9
29
35
Tax impact of non-GAAP adjustments
(25
)
(23
)
(71
)
(37
)
Net adjustment items
74
72
213
102
Adjusted net income
$
2,350
$
1,211
94.1
%
$
4,012
$
2,792
43.7
%
Net income per diluted share
$
8.91
$
4.36
104.4
%
$
14.85
$
10.28
44.5
%
Add / (Subtract):
Net realized (gains) losses on financial
instruments
(0.07
)
(0.04
)
0.02
(0.34
)
Amortization of other intangible
assets
0.36
0.33
0.69
0.66
Impairment (recoveries) losses recognized
in income
(0.04
)
0.03
0.18
0.06
Loss on extinguishment of debt
0.01
—
0.02
—
Transaction and integration related
costs
0.04
0.02
0.09
0.02
Litigation expenses
0.08
0.03
0.11
0.13
Tax impact of non-GAAP adjustments
(0.10
)
(0.09
)
(0.28
)
(0.14
)
Rounding impact
0.01
—
—
—
Net adjustment items
0.29
0.28
0.83
0.39
Adjusted net income per diluted share
$
9.20
$
4.64
98.3
%
$
15.68
$
10.67
47.0
%
Full Year 2020 Outlook
Net income per diluted share
Greater than $20.91
Add / (Subtract):
Net realized losses on financial
instruments
0.02
Impairment losses recognized in income
0.18
Loss on extinguishment of debt
0.02
Transaction and integration related
costs
0.09
Litigation expenses
0.11
Amortization of other intangible
assets
Approximately $1.41
Tax impact of non-GAAP adjustments
Approximately ($0.44)
Net adjustment items
Approximately $1.39
Adjusted net income per diluted share
Greater than $22.30
Three Months Ended June 30
Six Months Ended June 30
(In millions)
2020
2019
Change
2020
2019
Change
Reportable segments operating gain
$
3,360
$
1,433
134.5
%
$
5,554
$
3,373
64.7
%
Net investment income
57
285
311
495
Net realized gains (losses) on financial
instruments
18
11
(6
)
89
Impairment recoveries (losses) recognized
in income
11
(7
)
(46
)
(17
)
Interest expense
(201
)
(184
)
(395
)
(371
)
Amortization of other intangible
assets
(93
)
(85
)
(176
)
(172
)
(Loss) gain on extinguishment of debt
(3
)
—
(4
)
1
Income before income tax expense
$
3,149
$
1,453
116.7
%
$
5,238
$
3,398
54.1
%
Forward-Looking Statements
This document contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements reflect our views about future
events and financial performance and are generally not historical
facts. Words such as “expect,” “feel,” “believe,” “will,” “may,”
“should,” “anticipate,” “intend,” “estimate,” “project,”
“forecast,” “plan” and similar expressions are intended to identify
forward-looking statements. These statements include, but are not
limited to: financial projections and estimates and their
underlying assumptions; statements regarding plans, objectives and
expectations with respect to future operations, products and
services; and statements regarding future performance. Such
statements are subject to certain risks and uncertainties, many of
which are difficult to predict and generally beyond our control,
that could cause actual results to differ materially from those
expressed in, or implied or projected by, the forward-looking
statements. You are cautioned not to place undue reliance on these
forward- looking statements that speak only as of the date hereof.
You are also urged to carefully review and consider the various
risks and other disclosures discussed in our reports filed with the
U.S. Securities and Exchange Commission from time to time, which
attempt to advise interested parties of the factors that affect our
business. Except to the extent otherwise required by federal
securities laws, we do not undertake any obligation to republish
revised forward-looking statements to reflect events or
circumstances after the date hereof. These risks and uncertainties
include, but are not limited to: the impact of large scale medical
emergencies, such as public health epidemics and pandemics,
including COVID-19, and catastrophes; trends in healthcare costs
and utilization rates; our ability to secure sufficient premium
rates, including regulatory approval for and implementation of such
rates; the impact of federal and state regulation, including
ongoing changes in the Patient Protection and Affordable Care Act
and the Health Care and Education Reconciliation Act of 2010, as
amended, or collectively, the ACA, and the ultimate outcome of
legal challenges to the ACA; changes in economic and market
conditions, as well as regulations that may negatively affect our
liquidity and investment portfolios; our ability to contract with
providers on cost-effective and competitive terms; competitive
pressures and our ability to adapt to changes in the industry and
develop and implement strategic growth opportunities; reduced
enrollment; unauthorized disclosure of member or employee sensitive
or confidential information, including the impact and outcome of
any investigations, inquiries, claims and litigation related
thereto; risks and uncertainties regarding Medicare and Medicaid
programs, including those related to non-compliance with the
complex regulations imposed thereon; our ability to maintain and
achieve improvement in Centers for Medicare and Medicaid Services,
or CMS, Star ratings and other quality scores and funding risks
with respect to revenue received from participation therein; a
negative change in our healthcare product mix; costs and other
liabilities associated with litigation, government investigations,
audits or reviews; the ultimate outcome of litigation between Cigna
Corporation and us related to the merger agreement between the
parties and the potential for such litigation to cause us to incur
substantial additional costs, including potential settlement and
judgment costs; risks and uncertainties related to our pharmacy
benefit management, or PBM, business including non-compliance by
any party with the PBM services agreement between us and
CaremarkPCS Health, L.L.C.; medical malpractice or professional
liability claims or other risks related to healthcare and PBM
services provided by our subsidiaries; general risks associated
with mergers, acquisitions, joint ventures and strategic alliances;
possible impairment of the value of our intangible assets if future
results do not adequately support goodwill and other intangible
assets; possible restrictions in the payment of dividends from our
subsidiaries and increases in required minimum levels of capital;
our ability to repurchase shares of our common stock and pay
dividends on our common stock due to the adequacy of our cash flow
and earnings and other considerations; the potential negative
effect from our substantial amount of outstanding indebtedness; a
downgrade in our financial strength ratings; the effects of any
negative publicity related to the health benefits industry in
general or us in particular; failure to effectively maintain and
modernize our information systems; events that may negatively
affect our licenses with the Blue Cross and Blue Shield
Association; the impact of international laws and regulations;
changes in U.S. tax laws; intense competition to attract and retain
employees; and various laws and provisions in our governing
documents that may prevent or discourage takeovers and business
combinations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200729005206/en/
Investor Relations Chris
Rigg Chris.Rigg@anthem.com
Media Jill Becher,
414-234-1573 Jill.Becher@anthem.com
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