Business Context and Reporting Period
This Form 8-K is a current report filed by Anthem, Inc. (now Elevance Health, Inc.) on January 10, 2017. The filing announces that company officers will discuss preliminary full-year 2016 financial results with analysts and investors on January 10-11, 2017. Detailed financial results are scheduled for release on February 1, 2017.
Key Financial Metrics and Outlook
The filing provides preliminary full-year 2016 earnings guidance per diluted share:
- Net Income: Approximately $9.21 per share.
- Adjusted Net Income: Approximately $11.00 per share.
- Net Adjustment Items: $1.79 per share (unfavorable items excluded from adjusted income).
- Medical Enrollment: Expected year-end 2016 enrollment is approximately 39.9 million members.
The filing does not provide specific values for total revenue, operating cash flow, debt levels, or liquidity ratios in this preliminary announcement.
Components of Adjusted Net Income
| Item | Amount (Per Share) |
|---|---|
| Net realized (gains)/losses on investments | (0.02) |
| Other-than-temporary impairment losses on investments | 0.43 |
| Transaction related costs | 1.20 |
| Deferred tax asset write-off (California tax legislation) | 0.08 |
| Amortization of other intangible assets | 0.72 |
| Tricare bid conclusion costs | 0.14 |
| Tax impact of non-GAAP adjustments | (0.76) |
Material Changes and Drivers
The increase in the full-year 2016 adjusted net income outlook is primarily attributed to the favorable impact of a retroactive change in the minimum Medical Loss Ratio (MLR) calculation under California's Medicaid expansion program. Additionally, the year-end medical enrollment of 39.9 million members is noted as being ahead of the company's earlier expectations.
Guidance, Risks, and Contingencies
Forward-Looking Statements: The document contains forward-looking statements regarding financial projections, the pending acquisition of Cigna Corporation, and future operations. These are subject to risks and uncertainties.
Key Risks and Contingencies:
- Cigna Acquisition: Risks regarding the ultimate outcome, regulatory approvals, integration challenges, and the ability to achieve projected synergies.
- Regulatory Environment: Impact of the Affordable Care Act, changes in government participation in health benefits, and state-specific regulations (e.g., California MLR).
- Operational Risks: Trends in healthcare costs, provider contracting, enrollment mix, and competition.
- Legal and Compliance: Litigation, government investigations, and potential penalties related to the Express Scripts agreement or prior cyber-attacks.
- Financial Risks: Investment portfolio performance, liquidity constraints, and potential impairment of intangible assets.
Investor Verification Checklist
- Verify the final audited 2016 financial results when released on February 1, 2017, to confirm the preliminary $9.21 GAAP and $11.00 adjusted EPS figures.
- Confirm the status and regulatory approval timeline for the pending acquisition of Cigna Corporation.
- Review the detailed breakdown of the "Transaction related costs" ($1.20 per share) and "Amortization of other intangible assets" ($0.72 per share) in the upcoming earnings release.
- Assess the sustainability of the favorable California Medicaid MLR adjustment and its impact on future profitability.
- Monitor updates regarding the 2015 cyber-attack and any associated litigation or regulatory penalties.