Business Context and Reporting Period
This Form 8-K filing by Anthem, Inc. (now Elevance Health, Inc.) is dated January 12, 2016. The report announces upcoming investor meetings to discuss full-year 2015 financial results and the outlook for 2016. Detailed 2015 financial results are scheduled for release on January 27, 2016.
Key Financial Metrics and Guidance
Full Year 2015 Outlook
- Net Income per Diluted Share: Approximately $9.38.
- Adjusted Net Income per Diluted Share: Approximately $10.16.
- Net Adjustment Items: $0.78 per share (excluding net unfavorable items).
- Medical Enrollment: Expected year-end 2015 enrollment is approximately 38.6 million members.
Full Year 2016 Guidance
- Net Income per Diluted Share: Greater than $10.35 (includes greater than $0.45 for amortization of other intangible assets).
- Adjusted Net Income per Diluted Share: Greater than $10.80 (excluding amortization of other intangible assets).
- Exclusions: Guidance excludes transaction costs related to the Cigna Corporation acquisition, investment gains/losses, and other-than-temporary impairment losses.
Specific Adjustments for 2015
The 2015 net income expectation includes approximately $0.04 per share in assessments associated with the dissolution of the Colorado Co-op, which was not included in previous guidance.
Material Changes and Unusual Items
The filing details specific items impacting the reconciliation between reported and adjusted net income for 2015:
- Net realized gains on investments: $(0.38) per share.
- Other-than-temporary impairment losses on investments: $0.20 per share.
- Gain on extinguishment of debt: $(0.02) per share.
- Transaction related costs: $0.27 per share.
- Amortization of other intangible assets: $0.55 per share.
- California adverse franchise tax ruling: $0.16 per share.
The filing notes that the 2016 guidance does not include costs or impacts related to the pending acquisition of Cigna Corporation.
Risks and Contingencies
The document includes a comprehensive Safe Harbor statement identifying significant risks that could cause actual results to differ from projections. Key risks include:
- Regulatory Environment: Impact of the Affordable Care Act, health care reform, and government participation in managed care.
- Acquisition Risks: Uncertainties regarding the Cigna Corporation acquisition, including regulatory approval, integration challenges, and synergy realization.
- Operational Risks: Trends in health care costs, premium rate adequacy, provider contracting, and enrollment mix.
- Legal and Compliance: Litigation, investigations, Medicare/Medicaid compliance, and the impact of the February 2015 cyber-attack.
- Financial Risks: Investment portfolio performance, liquidity, indebtedness, and potential impairment of intangible assets.
Investor Verification Checklist
- Verify the final 2015 financial results when released on January 27, 2016, to confirm the $9.38 net income and $10.16 adjusted net income per share.
- Monitor the status of the Cigna Corporation acquisition, as transaction costs and integration impacts are excluded from current 2016 guidance.
- Review the impact of the Colorado Co-op dissolution assessments ($0.04 per share) on the final 2015 earnings report.
- Assess the company's ability to maintain the projected 38.6 million member enrollment level.
- Track developments regarding the February 2015 cyber-attack and any associated litigation or regulatory penalties.