Anthem, Inc. (NYSE: ANTM) reported fourth quarter 2020 results
that reflected solid performance across the enterprise.
“Despite uncertainties with the pandemic, Anthem delivered
strong growth across all of our businesses in 2020 reflecting the
diversity and strength of our portfolio and our unwavering
commitment to those we serve,” said Gail K. Boudreaux, President
and CEO, Anthem, Inc. “I am proud of all that we accomplished
during this challenging time, and we remain focused on supporting
our members, customers and communities as a trusted health
partner.”
As part of Anthem's efforts to combat the global pandemic,
address health inequities, and adapt to the ever-changing
healthcare environment, the Company has remained focused on
fostering deeper relationships and developing innovative solutions
to meet critical needs for its stakeholders. Actions taken during
2020 to support our members, customers, care providers and local
communities include:
Care for our Anthem associates
- 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.
- Launched a Winter Wellbeing campaign to continue our commitment
to associates' health and wellness by making additional resources
easily accessible.
- Launched the confidential Associate Care Service, a 24/7
hotline for emergencies such as food insecurity, childcare for
caregiver needs, and support for other needs.
Care for our consumers, customers, and providers
- Waived all cost-sharing for COVID-19 diagnostic tests and
treatment.
- Provided expanded telehealth coverage for our members and
waived cost-sharing for in-network telehealth visits, including
telephonic visits, and those for mental health.
- Relaxed early prescription refill policies for maintenance and
specialty medications.
- Working with providers to accelerate claims processing, resolve
claims, and accelerate 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.
- Offered in-network dental providers a $10 PPE credit per
patient, per visit through the end of December 2020.
- Suspended select prior authorization requirements.
- Partnering with our states in the distribution of COVID-19
vaccines.
- Launched the COVID-19 Vaccine tool to provide personalized
vaccination insights for Anthem members.
- Launched Sydney Care Daily COVID-19 Check-In to help employers
and their employees quickly and safely return to work, and make
informed decisions about keeping their workforce safe.
- 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.
- Opened hundreds of digital solutions kiosks in health centers
across California to provide real-time video interpretation
services and access to telehealth.
- 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.
- 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.
- 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.
- 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.
- Partnering with Lyft to provide transportation for at-risk
communities to support universal access to the COVID-19 vaccine,
with the goal of 60 million rides.
- 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.
- Collaborating with leading nonprofit partners and others to
provide no-cost pop-up flu clinics in vulnerable communities across
our markets to make it easier for people to get vaccinated and to
increase health equity.
- Providing virtual volunteer opportunities, such as remote
teaching or mailing cards to seniors facing loneliness, to help
associates safely give back to communities.
- Anthem and the Anthem Foundation are founding anchor partners
of XPRIZE Rapid COVID Testing, a collaboration with XPRIZE,
OpenCovidScreen and other Blue Cross 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.
- Managing a new study via our HealthCore subsidiary to help
understand and combat Multisystem Inflammatory Syndrome in
children, or MIS-C, arising from the COVID-19 pandemic.
- Anthem's associates volunteered 110,000 hours in 2020.
- In 2020, through our Associate Community Engagement Programs,
associates raised nearly $6.7 million dollars for community
organizations across the country.
- Launched the Pandemic Response Innovation Challenge with MATTER
and Blue Cross Blue Shield of Illinois to call on global innovators
to develop creative solutions aimed at supporting the health care
needs of those impacted by the COVID-19 pandemic.
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.
- Anthem Foundation and March of Dimes have partnered to tackle
maternal and infant health disparities by addressing social
determinants of health. The $1.1 million grant includes Breaking
Through Implicit Bias in Maternal Healthcare training for providers
at more than 20 hospitals.
- Joined the UN Global Compact, deepening our dedication to
improving health and shaping stronger, more inclusive, more
sustainable communities.
- Joined coalition of corporate and civic organizations to launch
the Indy Racial Equity Pledge designed to drive measurable progress
in advancing racial equity for African Americans in Central
Indiana.
CONSOLIDATED HIGHLIGHTS
Earnings Per Share: GAAP net income was $2.19 per share
in the fourth quarter, including net negative adjustment items of
$0.35 per share. Adjusted net income was $2.54* per share. Full
year GAAP net income was $17.98 per share, including net negative
adjustment items of $4.50 per share. Adjusted net income was
$22.48* per share.
*Please refer to the GAAP reconciliation tables.
Membership: Medical enrollment totaled approximately 42.9
million members at December 31, 2020, an increase of 1.9 million
lives, or 4.7 percent from December 31, 2019. Total risk enrollment
grew by 1.7 million lives, or 11 percent, and fee-based enrollment
grew by 211 thousand lives, or 0.8 percent. Government Business
enrollment increased by 1.9 million lives compared to the prior
year, attributable to Medicaid, reflecting organic growth as a
result of the temporary suspension of eligibility recertification
efforts in our markets as well as our acquisition of the Medicaid
plans in Missouri and Nebraska, and growth in Medicare Advantage.
Commercial & Specialty Business enrollment increased by 67
thousand lives driven by the acquisition of AmeriBen and growth in
our National business, partially offset by higher in-group change
as a result of the economic environment.
During the fourth quarter of 2020, medical enrollment increased
sequentially by 300 thousand lives, reflecting organic growth in
Medicaid and Medicare businesses as well as sales exceeding lapses
in our Local Group business, partially offset by in-group change in
the National business.
Operating Revenue: Operating revenue was $31.5 billion in
the fourth quarter of 2020, an increase of $4.4 billion, or 16.2
percent, versus the prior year quarter, driven by higher premium
revenue due to growth in Medicaid and Medicare. The increase was
further attributable to pharmacy product revenue related to
IngenioRx and the return of the health insurance tax in 2020.
Benefit Expense Ratio: The benefit expense ratio was 88.9
percent in the fourth quarter of 2020, a decrease of 10 basis point
from 89.0 percent compared to the prior year quarter. The decrease
was driven by reduced non-COVID healthcare utilization due to the
pandemic, and to a lesser extent, the return of the health
insurance tax in 2020. Taken together, the decrease was largely
offset by costs associated with COVID-19, including testing and
treatment and the actions taken to support our members in response
to the pandemic.
Medical claims reserves established at December 31, 2019
developed in line with the Company’s expectations during 2020.
Days in Claims Payable: Days in Claims Payable was 43.4
days as of December 31, 2020, an increase of 2.3 days from
September 30, 2020 and an increase of 5.4 days as compared to
December 31, 2019.
SG&A Expense Ratio: The SG&A expense ratio was
13.7 percent in the fourth quarter of 2020, an increase of 80 basis
points from 12.9 percent in the fourth quarter of 2019, primarily
driven by the return of the health insurance tax in 2020 and
increased spend to support growth, partially offset by growth in
operating revenue.
Operating Cash Flow: Operating cash flow was $3.8 billion
in the fourth quarter of 2020, an increase of $2.5 billion compared
to the prior year quarter. The increase was primarily due to the
timing of working capital changes, including the early receipt of
certain payments that were originally expected to be received in
2021, and growth in premium revenue due to the return of the health
insurance tax in 2020 as well as membership growth in our
Government business.
Share Repurchase Program: During the fourth quarter of
2020, the Company repurchased 4.4 million shares of its common
stock for $1.4 billion, or a weighted average price of $305.66. For
the full year, the Company repurchased 9.4 million shares for $2.7
billion, or a weighted average price of $286.35. As of December 31,
2020, the Company had approximately $1.1 billion remaining of
Board-approved share repurchase authorization. On January 26, 2021,
our Audit Committee, pursuant to authorization granted by the Board
of Directors, authorized a $5.0 billion increase to the common
stock repurchase program. The Company intends to utilize this
authorization over a multi-year period, subject to market and
industry conditions.
Cash Dividend: During the fourth quarter of 2020, the
Company paid a quarterly dividend of $0.95 per share, representing
a distribution of cash totaling $234 million.
On January 26, 2021, the Audit Committee declared a first
quarter 2021 dividend to shareholders of $1.13 per share. On an
annualized basis, this equates to a dividend of $4.52 per share.
The first quarter dividend is payable on March 25, 2021 to
shareholders of record at the close of business on March 10,
2021.
Investment Portfolio & Capital Position: During the
fourth quarter of 2020, the Company recorded net realized gains of
$5 million. During the fourth quarter of 2019, the Company recorded
net realized gains of $7 million.
As of December 31, 2020, the Company’s net unrealized gain
position in the investment portfolio was $1.2 billion, consisting
primarily of fixed maturity securities. As of December 31, 2020
cash and investments at the parent company totaled approximately
$1.7 billion.
REPORTABLE SEGMENTS
Effective January 1, 2020, Anthem, Inc. has four reportable
segments: Commercial & Specialty Business (comprised of the
Local Group, National Accounts, Individual and Specialty
businesses); Government Business (comprised of the Medicaid,
Medicare, and Federal Health Products & Services businesses);
IngenioRx, and Other (comprised of the Diversified Business Group
and corporate expenses not allocated to our other reportable
segments).
Anthem, Inc.
Reportable Segment
Highlights
(Unaudited)
(In millions)
Three Months Ended December
31
Twelve Months Ended December
31
2020
2019
Change
2020
2019
Change
Operating Revenue
Commercial & Specialty Business
$
9,223
$
9,328
(1.1
)%
$
36,699
$
37,421
(1.9
)%
Government Business
18,763
16,213
15.7
%
71,572
62,632
14.3
%
IngenioRx
5,863
3,232
81.4
%
21,911
5,402
305.6
%
Other
1,780
613
190.4
%
6,057
2,293
164.2
%
Eliminations
(4,096
)
(2,254
)
NM2
(15,431
)
(4,607
)
NM2
Total Operating Revenue1
$
31,533
$
27,132
16.2
%
$
120,808
$
103,141
17.1
%
Operating Gain / (Loss)3
Commercial & Specialty Business
$
123
$
527
(76.7
)%
$
2,681
$
4,032
(33.5
)%
Government Business
169
586
(71.2
)%
2,444
2,056
18.9
%
IngenioRx
363
—
NM2
1,361
—
NM2
Other
(50
)
(15
)
NM2
(126
)
(89
)
NM2
Total Operating Gain1
$
605
$
1,098
(44.9
)%
$
6,360
$
5,999
6.0
%
Operating Margin
Commercial & Specialty Business
1.3%
5.6%
(430) bp
7.3%
10.8%
(350) bp
Government Business
0.9%
3.6%
(270) bp
3.4%
3.3%
10 bp
IngenioRx
6.2%
—
NM2
6.2%
—%
NM2
Total Operating Margin1
1.9%
4.0%
(210) bp
5.3%
5.8%
(50) bp
(1) See “Basis of Presentation.”
(2) "NM" = calculation not meaningful.
(3) Operating gain for the twelve months ended December 31, 2020
included $653 related to business optimization charges; $311 for
Commercial & Specialty Business; $205 for the Government
Business; $4 for IngenioRx; and $133 for the Other segment.
Operating gain for the twelve months ended December 31, 2020
included $548 related to the BCBSA litigation settlement accrual;
$524 for the Commercial & Specialty Business and $24 for the
Government Business.
Commercial & Specialty Business: Operating gain in
the Commercial & Specialty Business segment totaled $123
million in the fourth quarter of 2020, a decrease of $404 million
from an operating gain of $527 million in the fourth quarter of
2019. The decrease was primarily attributable to costs associated
with COVID-19, including testing and treatment and the actions
taken to support our members in response to the pandemic, partially
offset by reduced non-COVID healthcare utilization. Additionally,
the decline was driven by the shift of pharmacy earnings to the
IngenioRx segment.
Government Business: Operating gain in the Government
Business segment was $169 million in the fourth quarter of 2020, a
decrease of $417 million, or 71.2 percent, from $586 million in the
fourth quarter of 2019. The decrease was primarily driven by costs
associated with COVID-19, including testing and treatment and the
actions taken to support our members in response to the pandemic,
partially offset by reduced non-COVID healthcare utilization. The
decline was further attributable to the shift of pharmacy earnings
to the IngenioRx segment, retroactive rate adjustments in Medicaid,
and increased spend to support growth.
IngenioRx: IngenioRx commenced operations in the second
quarter of 2019 and the transition of membership was completed on
January 1, 2020. Operating gain was $363 million in the fourth
quarter of 2020. Calendar year 2020 represented the first full year
of operations for IngenioRx.
Other: The Company reported an operating loss of $50
million in the Other segment for the fourth quarter of 2020,
compared with an operating loss of $15 million in the prior year
quarter.
OUTLOOK
Full Year 2021:
- GAAP net income is expected to be greater than $23.51 per
share, including approximately $0.99 per share of net unfavorable
items. Excluding these items, adjusted net income is expected to be
greater than $24.50* per share. Adjusted net income guidance
includes new items that were unknown prior to December 2020,
including the passage of the Consolidated Appropriations Act, which
includes a one-year increase in Medicare physician rates as well as
other COVID-19 related impacts on the Medicare business. All in,
these items resulted in a net negative headwind of
$0.50-$0.70.
- Medical membership is expected to be in the range of 44.1 -
44.7 million. Fully insured membership is expected to be in the
range of 18.6 - 19.0 million. Self-funded membership is expected to
be in the range of 25.5 - 25.7 million.
- Operating revenue is expected to be approximately $135.1
billion, including premium revenue of $114.5 billion - $115.5
billion.
- Benefit expense ratio is expected to be in the range of 88.0%
plus or minus 50 basis points.
- SG&A ratio is expected to be 10.8% plus or minus 50 basis
points.
- Operating cash flow is expected to be greater than $5.7
billion.
- Investment income is expected to be $940 million.
- Interest expense is expected to be $785 million.
- Effective tax rate is expected to be between 20.0 - 22.0%.
- Share count is expected to be between 246 - 248 million.
* Refer to the GAAP reconciliation tables.
Basis of Presentation
- Operating revenue and operating gain/loss 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/loss
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, 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 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 Standard Time (“EST”) to discuss the company’s fourth
quarter results and outlook. The conference call should be accessed
at least 15 minutes prior to the start of the call with the
following numbers:
888-947-9963 (Domestic)
888-566-0512 (Domestic Replay)
312-470-0178 (International)
203-369-3061 (International Replay)
The access code for today's conference call is 2583196.
The replay will be available from 11:30 a.m. EST today, until the
end of the day on February 26, 2021. The call will also be
available through a live webcast at www.antheminc.com under the
“Investors” link. A webcast replay will be available following the
call.
About Anthem, Inc.
Anthem is a leading health benefits company dedicated to
improving lives and communities, and making healthcare simpler.
Through its affiliated companies, Anthem serves more than 110
million people, including approximately 43 million within its
family of health plans. We aim to be the most innovative, valuable
and inclusive partner. For more information, please visit
www.antheminc.com or follow @AnthemInc on Twitter.
Anthem, Inc.
Membership Summary
(Unaudited and in Thousands)
Change from
Medical
Membership
December 31, 2020
December 31, 2019
September 30, 2020
December 31, 2019
September 30, 2020
Customer Type
Local Group
15,614
15,682
15,509
(0.4)
%
0.7
%
Individual
680
684
701
(0.6)
%
(3.0)
%
National:
National Accounts
7,736
7,596
7,773
1.8
%
(0.5)
%
BlueCard®
6,059
6,060
6,106
—
%
(0.8)
%
Total National
13,795
13,656
13,879
1.0
%
(0.6)
%
Medicare:
Medicare Advantage
1,428
1,214
1,416
17.6
%
0.8
%
Medicare Supplement
933
905
933
3.1
%
—
%
Total Medicare
2,361
2,119
2,349
11.4
%
0.5
%
Medicaid
8,852
7,265
8,569
21.8
%
3.3
%
Federal Employees Health Benefits
1,623
1,594
1,618
1.8
%
0.3
%
Total Medical Membership
42,925
41,000
42,625
4.7
%
0.7
%
Funding Arrangement
Self-Funded
25,629
25,418
25,633
0.8
%
—
%
Fully-Insured
17,296
15,582
16,992
11.0
%
1.8
%
Total Medical Membership
42,925
41,000
42,625
4.7
%
0.7
%
Reportable Segment
Commercial & Specialty Business
30,089
30,022
30,089
0.2
%
—
%
Government Business
12,836
10,978
12,536
16.9
%
2.4
%
Total Medical Membership
42,925
41,000
42,625
4.7
%
0.7
%
Other
Membership
Life and Disability Members
5,064
5,259
5,029
(3.7)
%
0.7
%
Dental Members
6,385
6,263
6,356
1.9
%
0.5
%
Dental Administration Members
1,316
5,516
1,315
(76.1)
%
0.1
%
Vision Members
7,536
7,261
7,487
3.8
%
0.7
%
Medicare Part D Standalone Members
413
283
405
45.9
%
2.0
%
Anthem, Inc.
Consolidated Statements of
Income
(Unaudited)
(In millions, except per share data)
Three Months Ended December
31
2020
2019
Change
Revenues
Premiums
$
27,108
$
24,036
12.8
%
Product revenue
2,899
1,500
93.3
%
Administrative fees and other revenue
1,526
1,596
(4.4)
%
Total operating revenue
31,533
27,132
16.2
%
Net investment income
286
268
6.7
%
Net realized gains on financial
instruments
5
7
NM
Total revenues
31,824
27,407
16.1
%
Expenses
Benefit expense
24,088
21,383
12.7
%
Cost of products sold
2,522
1,149
119.5
%
Selling, general and administrative
expense
4,318
3,502
23.3
%
Interest expense
191
190
0.5
%
Amortization of other intangible
assets
92
82
12.2
%
Loss on extinguishment of debt
2
3
NM
Total expenses
31,213
26,309
18.6
%
Income before income tax expense
611
1,098
(44.4)
%
Income tax expense
60
164
(63.4)
%
Net income
$
551
$
934
(41.0)
%
Net income per diluted share
$
2.19
$
3.62
(39.5)
%
Diluted shares
251.1
258.0
(2.7)
%
Benefit expense as a percentage of
premiums
88.9
%
89.0
%
(10)
bp
Selling, general and administrative
expense as a percentage of total operating revenue
13.7
%
12.9
%
80
bp
Income before income taxes as a percentage
of total revenue
1.9
%
4.0
%
(210)
bp
"NM" = calculation not meaningful
Anthem, Inc.
Consolidated Statements of
Income
(Unaudited)
(In millions, except per share data)
Twelve Months Ended December
31
2020
2019
Change
Revenues
Premiums
$
104,109
$
94,173
10.6
%
Product revenue
10,384
2,760
276.2
%
Administrative fees and other revenue
6,315
6,208
1.7
%
Total operating revenue
120,808
103,141
17.1
%
Net investment income
877
1,005
(12.7)
%
Net realized gains on financial
instruments
182
67
171.6
%
Total revenues
121,867
104,213
16.9
%
Expenses
Benefit expense
88,045
81,786
7.7
%
Cost of products sold
8,953
1,992
349.4
%
Selling, general and administrative
expense
17,450
13,364
30.6
%
Interest expense
784
746
5.1
%
Amortization of other intangible
assets
361
338
6.8
%
Loss on extinguishment of debt
36
2
NM
Total expenses
115,629
98,228
17.7
%
Income before income tax expense
6,238
5,985
4.2
%
Income tax expense
1,666
1,178
41.4
%
Net income
$
4,572
$
4,807
(4.9)
%
Net income per diluted share
$
17.98
$
18.47
(2.7)
%
Diluted shares
254.3
260.3
(2.3)
%
Benefit expense as a percentage of
premiums
84.6
%
86.8
%
(220)
bp
Selling, general and administrative
expense as a percentage of total operating revenue
14.4
%
13.0
%
140
bp
Income before income taxes as a percentage
of total revenue
5.1
%
5.7
%
(60)
bp
"NM" = calculation not meaningful
Anthem, Inc.
Consolidated Balance
Sheets
(In millions)
December 31,
2020
December 31,
2019
Assets
(Unaudited)
Current assets:
Cash and cash equivalents
$
5,741
$
4,937
Fixed maturity securities, current
(amortized cost of $22,222 and $19,021; allowance for credit losses
of $7 and $0)
23,433
19,676
Equity securities, current
1,559
1,009
Premium receivables
5,279
5,014
Self-funded receivables
2,849
2,570
Other receivables
2,830
2,807
Other current assets
4,060
3,020
Total current assets
45,751
39,033
Long-term investments:
Fixed maturity securities (amortized cost
of $532 and $487; allowance for credit losses of $0 and $0)
562
505
Other invested assets
4,285
4,258
Property and equipment, net
3,483
3,133
Goodwill
21,691
20,500
Other intangible assets
9,405
8,674
Other noncurrent assets
1,438
1,350
Total assets
$
86,615
$
77,453
Liabilities and shareholders’
equity
Liabilities
Current liabilities:
Medical claims payable
$
11,359
$
8,842
Other policyholder liabilities
4,590
3,050
Unearned income
1,259
1,017
Accounts payable and accrued expenses
5,493
4,198
Short-term borrowings
—
700
Current portion of long-term debt
700
1,598
Other current liabilities
6,052
4,127
Total current liabilities
29,453
23,532
Long-term debt, less current portion
19,335
17,787
Reserves for future policy benefits
794
759
Deferred tax liabilities, net
2,019
2,227
Other noncurrent liabilities
1,815
1,420
Total liabilities
53,416
45,725
Shareholders’ equity
Common stock
3
3
Additional paid-in capital
9,244
9,448
Retained earnings
23,802
22,573
Accumulated other comprehensive income
(loss)
150
(296)
Total shareholders’ equity
33,199
31,728
Total liabilities and shareholders’
equity
$
86,615
$
77,453
Anthem, Inc.
Consolidated Statements of
Cash Flows
(Unaudited)
(In millions)
Twelve Months Ended December
31
2020
2019
Operating activities
Net income
$4,572
$4,807
Adjustments to reconcile net income to net
cash provided by operating activities:
Net realized gains on financial
instruments
(182
)
(67
)
Depreciation and amortization
1,154
1,133
Deferred income taxes
(540
)
81
Impairment of property and equipment
198
—
Share-based compensation
283
294
Changes in operating assets and
liabilities:
Receivables, net
(256
)
(1,053
)
Other invested assets
(32
)
(48
)
Other assets
(283
)
(170
)
Policy liabilities
3,528
1,826
Unearned income
202
115
Accounts payable and other liabilities
1,978
(445
)
Income taxes
72
(325
)
Other, net
(6
)
(87
)
Net cash provided by operating
activities
10,688
6,061
Investing activities
Purchases of investments
(19,492
)
(22,954
)
Proceeds from sale of investments
11,318
18,598
Maturities, calls and redemptions from
investments
4,741
2,437
Changes in securities lending
collateral
(849
)
254
Purchases of subsidiaries, net of cash
acquired
(1,976
)
—
Purchases of property and equipment
(1,021
)
(1,077
)
Other, net
(45
)
(50
)
Net cash used in investing activities
(7,324
)
(2,792
)
Financing activities
Net repayments of commercial paper
borrowings
(150
)
(297
)
Net repayments of short-term
borrowings
(700
)
(445
)
Net proceeds from long-term borrowings
552
1,350
Changes in securities lending payable
849
(254
)
Repurchase and retirement of common
stock
(2,700
)
(1,701
)
Cash dividends
(954
)
(818
)
Proceeds from issuance of common stock
under employee stock plans
176
187
Taxes paid through withholding of common
stock under employee stock plans
(128
)
(84
)
Other, net
488
(204
)
Net cash used in financing activities
(2,567
)
(2,266
)
Effect of foreign exchange rates on cash
and cash equivalents
7
—
Change in cash and cash equivalents
804
1,003
Cash and cash equivalents at beginning of
period
4,937
3,934
Cash and cash equivalents at end of
period
$5,741
$4,937
Anthem, Inc.
Reconciliation of Medical
Claims Payable
Years Ended December 31
2020
2019
2018
(In millions)
(Unaudited)
Gross medical claims payable, beginning of
year
$
8,647
$
7,266
$
7,814
Ceded medical claims payable, beginning of
year
(33)
(34)
(105)
Net medical claims payable, beginning of
year
8,614
7,232
7,709
Business combinations and purchase
adjustments
339
—
199
Net incurred medical claims:
Current year
85,094
78,695
69,581
Prior years redundancies(1)
(637)
(500)
(930)
Total net incurred medical claims
84,457
78,195
68,651
Net payments attributable to:
Current year medical claims
74,629
70,294
62,748
Prior years medical claims
7,692
6,519
6,579
Total net payments
82,321
76,813
69,327
Net medical claims payable, end of
year
11,089
8,614
7,232
Ceded medical claims payable, end of
year
46
33
34
Gross medical claims payable, end of
year*
$
11,135
$
8,647
$
7,266
Current year medical claims paid as a
percentage of current year net incurred medical claims
87.7
%
89.3
%
90.2
%
Prior year redundancies in the current
year as a percentage of prior year net medical claims payable less
prior year redundancies in the current year
8.0
%
7.4
%
13.7
%
Prior year redundancies in the current
year as a percentage of prior year net incurred medical claims
0.8
%
0.7
%
1.3
%
(1) Negative amounts reported for net
incurred medical claims related to prior years result from claims
being settled for amounts less than originally estimated.
* Excludes insurance lines other than
short duration.
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. Prior amounts may be grouped differently to conform
to current presentation.
Three Months Ended December
31
Twelve Months Ended December
31
(In millions, except per share data)
2020
2019
Change
2020
2019
Change
Net income
$
551
$
934
(41.0
)%
$
4,572
$
4,807
(4.9
)%
Add / (Subtract):
Net realized gains on financial
instruments
(5
)
(7
)
(182
)
(67
)
Amortization of other intangible
assets
92
82
361
338
Loss on extinguishment of debt
2
3
36
2
Business optimization charges
46
—
653
—
BCBSA litigation settlement
(46
)
—
548
—
Transaction and integration related
costs
22
3
49
11
Litigation expenses
6
8
40
52
Tax impact of non-GAAP adjustments
(31
)
(23
)
(360
)
(84
)
Net adjustment items
86
66
1,145
252
Adjusted net income
$
637
$
1,000
(36.3
)%
$
5,717
$
5,059
13.0
%
Net income per diluted share
$
2.19
$
3.62
(39.5
)%
$
17.98
$
18.47
(2.7
)%
Add / (Subtract):
Net realized gains on financial
instruments
(0.02
)
(0.02
)
(0.72
)
(0.26
)
Amortization of other intangible
assets
0.37
0.32
1.42
1.30
Loss on extinguishment of debt
0.01
0.01
0.14
0.01
Business optimization charges
0.18
—
2.57
—
BCBSA litigation settlement
(0.18
)
—
2.15
—
Transaction and integration related
costs
0.09
0.01
0.19
0.04
Litigation expenses
0.02
0.03
0.16
0.20
Tax impact of non-GAAP adjustments
(0.12
)
(0.09
)
(1.42
)
(0.32
)
Rounding impact
—
—
0.01
—
Net adjustment items
0.35
0.26
4.50
0.97
Adjusted net income per diluted share
$
2.54
$
3.88
(34.5
)%
$
22.48
$
19.44
15.6
%
Full Year 2021 Outlook
Net income per diluted share
Greater than $23.51
Add / (Subtract):
Amortization of other intangible
assets
Approximately $1.31
Tax impact of non-GAAP adjustments
Approximately $(0.32)
Net adjustment items
Approximately $0.99
Adjusted net income per diluted share
Greater than $24.50
Three Months Ended December
31
Twelve Months Ended December
31
(In millions)
2020
2019
Change
2020
2019
Change
Reportable segments operating gain
$
605
$
1,098
(44.9
)%
$
6,360
$
5,999
6.0
%
Net investment income
286
268
877
1,005
Net realized gains on financial
instruments
5
7
182
67
Interest expense
(191
)
(190
)
(784
)
(746
)
Amortization of other intangible
assets
(92
)
(82
)
(361
)
(338
)
Loss on extinguishment of debt
(2
)
(3
)
(36
)
(2
)
Income before income tax expense
$
611
$
1,098
(44.4
)%
$
6,238
$
5,985
4.2
%
Anthem, Inc.
Financial Guidance
Summary
(Unaudited)
Full Year 2020 Actual
Full Year 2021 Outlook
Approximate Change
Year-End Medical Enrollment
Self-funded
25,629
25,500 - 25,700
(129k) - 71k
Fully-Insured
17,296
18,600 - 19,000
1,304k - 1,704k
Total
42,925
44,100 - 44,700
1,175k - 1,775k
Operating Revenue
$120.8 billion
$135.1 billion
Approximately $14.3 billion or
11.8%
Premium Revenue
$104.1 billion
$114.5 - $115.5 billion
$10.4 - $11.4 billion or 10.0 -
10.9%
Benefit Expense Ratio
84.6%
88.0% +/- 50 bps
340 bps +/- 50 bps
SG&A Expense Ratio
14.4%
10.8% +/- 50 bps
(360) bps +/- 50 bps
Operating Gain
$6.4 billion
Greater than $7.5 billion
Greater than $1.1 billion or
17.2%
Other Pre-Tax Items:
Net Investment income
$877 million
$940 million
$63 million
Interest Expense
($784) million
($785) million
($1) million
Amortization of Intangible Assets
($361) million
($324) million
$37 million
Net Pre-Tax Expense
($268) million
($169) million
$99 million
Effective Tax Rate
26.7%
20.0% - 22.0%
(6.7%) - (4.7%)
GAAP EPS
$17.98
Greater than $23.51
30.8% or better
Adjusted EPS
$22.48
Greater than $24.50
9.0% or better
Diluted Shares
254.3 million
246 - 248 million
(3.3%) - (2.5%)
Operating Cash Flow
$10.7 billion
Greater than $5.7 billion
($5.0) billion or better
Forward-Looking Statements
This document contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements reflect our views about future
events and financial performance and are generally not historical
facts. Words such as “expect,” “feel,” “believe,” “will,” “may,”
“should,” “anticipate,” “intend,” “estimate,” “project,”
“forecast,” “plan” and similar expressions are intended to identify
forward-looking statements. These statements include, but are not
limited to: financial projections and estimates and their
underlying assumptions; statements regarding plans, objectives and
expectations with respect to future operations, products and
services; and statements regarding future performance. Such
statements are subject to certain risks and uncertainties, many of
which are difficult to predict and generally beyond our control,
that could cause actual results to differ materially from those
expressed in, or implied or projected by, the forward-looking
statements. You are cautioned not to place undue reliance on these
forward- looking statements that speak only as of the date hereof.
You are also urged to carefully review and consider the various
risks and other disclosures discussed in our reports filed with the
U.S. Securities and Exchange Commission from time to time, which
attempt to advise interested parties of the factors that affect our
business. Except to the extent otherwise required by federal
securities laws, we do not undertake any obligation to republish
revised forward-looking statements to reflect events or
circumstances after the date hereof. These risks and uncertainties
include, but are not limited to: the impact of large scale medical
emergencies, such as public health epidemics and pandemics,
including COVID-19, and catastrophes; trends in healthcare costs
and utilization rates; our ability to secure sufficient premium
rates, including regulatory approval for and implementation of such
rates; the impact of federal and state regulation, including
ongoing changes in the Patient Protection and Affordable Care Act
and the Health Care and Education Reconciliation Act of 2010, as
amended (collectively, the "ACA") and the ultimate outcome of legal
challenges to the ACA; changes in economic and market conditions,
as well as regulations that may negatively affect our liquidity and
investment portfolios; our ability to contract with providers on
cost-effective and competitive terms; competitive pressures and our
ability to adapt to changes in the industry and develop and
implement strategic growth opportunities; reduced enrollment;
unauthorized disclosure of member or employee sensitive or
confidential information, including the impact and outcome of any
investigations, inquiries, claims and litigation related thereto;
risks and uncertainties regarding Medicare and Medicaid programs,
including those related to non-compliance with the complex
regulations imposed thereon; our ability to maintain and achieve
improvement in Centers for Medicare and Medicaid Services, or CMS
Star ratings and other quality scores and funding risks with
respect to revenue received from participation therein; a negative
change in our healthcare product mix; costs and other liabilities
associated with litigation, government investigations, audits or
reviews; the ultimate outcome of litigation between Cigna
Corporation and us related to the merger agreement between the
parties and the potential for such litigation to cause us to incur
substantial additional costs, including potential settlement and
judgment costs; risks and uncertainties related to our pharmacy
benefit management ("PBM") business including non-compliance by any
party with the PBM services agreement between us and CaremarkPCS
Health, L.L.C.; medical malpractice or professional liability
claims or other risks related to healthcare and PBM services
provided by our subsidiaries; general risks associated with
mergers, acquisitions, joint ventures and strategic alliances;
possible impairment of the value of our intangible assets if future
results do not adequately support goodwill and other intangible
assets; possible restrictions in the payment of dividends from our
subsidiaries and increases in required minimum levels of capital;
our ability to repurchase shares of our common stock and pay
dividends on our common stock due to the adequacy of our cash flow
and earnings and other considerations; the potential negative
effect from our substantial amount of outstanding indebtedness; a
downgrade in our financial strength ratings; the effects of any
negative publicity related to the health benefits industry in
general or us in particular; failure to effectively maintain and
modernize our information systems; events that may negatively
affect our licenses with the Blue Cross and Blue Shield
Association; the impact of international laws and regulations;
changes in U.S. tax laws; intense competition to attract and retain
employees; and various laws and provisions in our governing
documents that may prevent or discourage takeovers and business
combinations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210127005298/en/
Anthem Contacts: Investor
Relations Chris Rigg
Chris.Rigg@anthem.com
Media Michelle
Vanstory Michelle.Vanstory@anthem.com
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