Business Context and Reporting Period
This Form 8-K is a current report filed by Anthem, Inc. (now Elevance Health, Inc.) on March 16, 2016. The filing serves as a Regulation FD disclosure regarding upcoming communications with securities analysts and investors scheduled between March 16, 2016, and March 31, 2016.
Key Financial Metrics
The filing does not report historical revenue, profit, cash flow, or debt figures for a specific completed period. Instead, it provides forward-looking per-share earnings guidance for the full year 2016:
- Full Year 2016 Net Income Guidance: Greater than $10.35 per share.
- Amortization of Intangibles: Included in the above figure is greater than $0.45 per share.
- Adjusted Net Income Guidance: Greater than $10.80 per share (excluding amortization of other intangible assets).
Material Changes and Exclusions
Management intends to reaffirm the aforementioned guidance. The filing explicitly states that the guidance excludes the following potential items, which will be excluded from adjusted net income calculations if incurred:
- Transaction costs associated with the pending acquisition of Cigna Corporation.
- Investment gains or losses.
- Other-than-temporary impairment losses on investments.
Guidance, Outlook, and Risks
Outlook and M&A: The company is proceeding with the pending acquisition of Cigna Corporation. Management notes risks regarding the ability to achieve synergies, integration disruptions, and the possibility that the acquisition may not close due to regulatory approvals or other conditions.
Key Risks Disclosed:
- Regulatory Environment: Impact of the Affordable Care Act, health care reform, and government participation in managed care.
- Operational Challenges: Trends in health care costs, premium rate adequacy, and enrollment mix in Individual and Small Group markets.
- Cybersecurity: Ongoing risks related to the cyber-attack reported in February 2015, including potential litigation and data breaches.
- Financial Strength: Risks related to credit ratings, liquidity, indebtedness, and the ability to pay dividends or repurchase shares.
- Provider Relations: Ability to contract with providers on cost-effective terms and compliance with pharmacy benefit management agreements (Express Scripts).
Investor Verification Checklist
- Verify the status of regulatory approvals for the Cigna Corporation acquisition.
- Monitor updates regarding the February 2015 cyber-attack and associated litigation costs.
- Review subsequent filings for actual transaction costs related to the Cigna deal to compare against the "excluded" guidance assumptions.
- Assess the impact of health care reform on premium rates and enrollment in the Individual and Small Group markets.
- Confirm the company's ability to maintain financial strength ratings given the substantial indebtedness mentioned in the risk factors.