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10.02.2009 11:40:00
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Coventry Health Care Reports Fourth Quarter Earnings of $0.60 per Diluted Share
Coventry Health Care, Inc. (NYSE:CVH) today reported consolidated operating results for the quarter ended December 31, 2008. Operating revenues totaled $3.0 billion for the quarter with net earnings of $88.2 million, or $0.60 per diluted share. For the year ended December 31, 2008, total revenues were $11.9 billion with net earnings of $381.9 million, or $2.54 per diluted share.
"With the fourth quarter results as expected and 2008 behind us, we are pleased to reiterate 2009 guidance. The Company is completely focused on achieving 2009 guidance and expanding margins in 2010 and beyond,” said Allen F. Wise, chief executive officer of Coventry.
Fourth Quarter 2008 Highlights
- Revenues increased 8.3% from the prior year quarter
- Continued growth in Medicare Advantage, Medicare Part D, and Individual risk membership
-
Strong balance sheet and liquidity position
- $440 million of deployable free cash and Treasuries on hand
- Investment portfolio reflects a net unrealized gain position at year-end
- On a "same store” basis (e.g., excluding Vista), health plan commercial group risk premium yield increased 4.1% over the same prior year period, a sequential increase from 3.8% in the third quarter of 2008
Full Year 2008 Highlights
- Revenues increased 20.6% from the prior year
- Medicare Advantage growth of 97,000 members from the prior year, an increase of 34%
- Third consecutive year of strong performance for Medicare Part D including growth of 227,000 members from the prior year, an increase of 32%
- Continued growth in commercial small group risk and Individual risk membership
- GAAP cash flows from operations were $627.4 million, or 164% of net income
2009 Full Year Guidance (All metrics are consistent with previously provided guidance)
- Risk revenue of $11.8 billion to $12.4 billion
- Management services revenue of $1.26 billion to $1.33 billion
- Consolidated revenue of $13.06 billion to $13.73 billion
- Consolidated Medical Loss Ratio (MLR%) of 84.8% to 85.4%
- Cost of sales expense of $205.0 million to $220.0 million
-
Selling, general, and administrative expense (SG&A) of $2.275 billion
to $2.350 billion
- Includes 2009 network spend of $40.0 million to $50.0 million
- Depreciation and amortization expense of $146.0 million to $156.0 million
- Other income of $77.0 million to $87.0 million
- Interest expense of $90.0 million to $96.0 million
- Tax rate of 37.2% to 37.8%
- Diluted share count of 141.0 million to 145.0 million shares
-
GAAP EPS on a diluted basis of $1.70 to $1.90
- EPS midpoint of $2.00 excluding 2009 network spend
Mr. Allen F. Wise, chief executive officer of Coventry, will host a conference call at 8:00 a.m. ET on Tuesday, February 10, 2009. To listen to the call, dial toll-free at (888) 726-2459 or, for international callers, (913) 312-0855. Callers will be asked to identify themselves and their affiliations. The conference call will also be broadcast from Coventry’s Investor Relations website at www.coventryhealthcare.com. Coventry asks participants on both the call and webcast to review and be familiar with its filings with the Securities and Exchange Commission. A replay of the call will be available for one week at (888) 203-1112 or, for international callers, (719) 457-0820. The access code is 4571012.
This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are defined as statements that are not historical facts and include those statements relating to future events or future financial performance. Actual performance may be significantly impacted by certain risks and uncertainties including those described in Coventry’s Annual Report on Form 10-K for the year ended December 31, 2007 and Coventry’s Form 10-Q for the quarter ended September 30, 2008. Coventry undertakes no obligation to update or revise any forward-looking statements.
Coventry Health Care (www.coventryhealthcare.com) is a diversified national managed healthcare company based in Bethesda, Maryland, operating health plans, insurance companies, network rental and workers’ compensation services companies. Through its Commercial Business, Individual Consumer & Government Business, and Specialty Business divisions, Coventry provides a full range of risk and fee-based managed care products and services to a broad cross section of individuals, employer and government-funded groups, government agencies, and other insurance carriers and administrators.
| COVENTRY HEALTH CARE, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (Amounts in thousands, except per share data) | ||||||||||||||||
| Quarters Ended | Years Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
| Operating revenues: | ||||||||||||||||
| Managed care premiums | $ | 2,671,463 | $ | 2,448,048 | $ | 10,563,163 | $ | 8,689,633 | ||||||||
| Management services | 348,385 | 339,846 | 1,350,483 | 1,189,898 | ||||||||||||
| Total operating revenues | 3,019,848 | 2,787,894 | 11,913,646 | 9,879,531 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Medical costs | 2,237,629 | 1,918,933 | 8,868,579 | 6,920,531 | ||||||||||||
| Cost of sales | 56,562 | 36,001 | 195,600 | 93,808 | ||||||||||||
| Selling, general, administrative | 558,986 | 506,768 | 2,079,912 | 1,789,991 | ||||||||||||
| Depreciation and amortization | 35,707 | 42,544 | 150,226 | 142,569 | ||||||||||||
| Total operating expenses | 2,888,884 | 2,504,246 | 11,294,317 | 8,946,899 | ||||||||||||
| Operating earnings | 130,964 | 283,648 | 619,329 | 932,632 | ||||||||||||
| Operating earnings percentage of total revenues | 4.3 | % | 10.2 | % | 5.2 | % | 9.4 | % | ||||||||
| Interest expense | 25,840 | 26,195 | 96,386 | 82,217 | ||||||||||||
| Other income, net | 30,444 | 37,561 | 82,833 | 144,455 | ||||||||||||
| Earnings before income taxes | 135,568 | 295,014 | 605,776 | 994,870 | ||||||||||||
| Provision for income taxes | 47,327 | 110,679 | 223,881 | 368,776 | ||||||||||||
| Net earnings | $ | 88,241 | $ | 184,335 | $ | 381,895 | $ | 626,094 | ||||||||
| Net earnings per share, basic | $ | 0.60 | $ | 1.20 | $ | 2.56 | $ | 4.04 | ||||||||
| Net earnings per share, diluted | $ | 0.60 | $ | 1.18 | $ | 2.54 | $ | 3.98 | ||||||||
| Weighted average shares outstanding, basic | 146,813 | 153,637 | 148,893 | 154,884 | ||||||||||||
| Weighted average shares outstanding, diluted | 147,159 | 155,961 | 150,208 | 157,357 | ||||||||||||
| COVENTRY HEALTH CARE, INC. | |||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| (Amounts in thousands) | |||||||||
| December 31, | September 30, | December 31, | |||||||
| 2008 | 2008 | 2007 | |||||||
| (unaudited) | (unaudited) | ||||||||
| Assets: | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 1,123,114 | $ | 1,058,372 | $ | 945,535 | |||
| Short-term investments | 338,129 | 42,923 | 155,248 | ||||||
| Accounts receivable, net | 293,636 | 295,199 | 263,021 | ||||||
| Other receivables, net | 524,803 | 440,328 | 313,350 | ||||||
| Other current assets | 130,808 | 132,449 | 169,547 | ||||||
| Total current assets | 2,410,490 | 1,969,271 | 1,846,701 | ||||||
| Long-term investments | 1,709,878 | 1,580,961 | 1,758,454 | ||||||
| Property and equipment, net | 308,016 | 306,729 | 321,287 | ||||||
| Goodwill | 2,695,025 | 2,679,201 | 2,573,325 | ||||||
| Other intangible assets, net | 546,168 | 562,763 | 590,419 | ||||||
| Other long-term assets | 57,821 | 72,213 | 68,605 | ||||||
| Total assets | $ | 7,727,398 | $ | 7,171,138 | $ | 7,158,791 | |||
| Liabilities and Stockholders’ Equity: | |||||||||
| Current liabilities: | |||||||||
| Medical liabilities | $ | 1,446,391 | $ | 1,440,326 | $ | 1,161,963 | |||
| Accounts payable and accrued liabilities | 474,561 | 437,093 | 518,806 | ||||||
| Deferred revenue | 104,823 | 121,453 | 69,052 | ||||||
| Total current liabilities | 2,025,775 | 1,998,872 | 1,749,821 | ||||||
| Long-term debt, net | 1,902,472 | 1,472,315 | 1,662,021 | ||||||
| Other long-term liabilities | 368,482 | 392,942 | 445,470 | ||||||
| Total liabilities | 4,296,729 | 3,864,129 | 3,857,312 | ||||||
| Stockholders’ equity | 3,430,669 | 3,307,009 | 3,301,479 | ||||||
| Total liabilities and stockholders’ equity | $ | 7,727,398 | $ | 7,171,138 | $ | 7,158,791 | |||
| COVENTRY HEALTH CARE, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Amounts in thousands) | ||||||||
| (unaudited) | ||||||||
| Quarter Ended | Year Ended | |||||||
| December 31, 2008 | December 31, 2008 | |||||||
| Cash flows from operating activities: | ||||||||
| Net earnings | $ | 88,241 | $ | 381,895 | ||||
| Adjustments to earnings: | ||||||||
| Depreciation and amortization | 35,707 | 150,226 | ||||||
| Amortization of stock compensation | 15,027 | 60,582 | ||||||
| Loss on other-than-temporarily impaired securities | - | 36,160 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable, net | 1,563 | (28,699 | ) | |||||
| Medical liabilities | 5,271 | 276,417 | ||||||
| Accounts payable and other accrued liabilities | 36,193 | (45,115 | ) | |||||
| Deferred revenue | (16,630 | ) | 34,703 | |||||
| Other operating activities | (119,704 | ) | (238,813 | ) | ||||
| Net cash flows from operating activities | 45,668 | 627,356 | ||||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures, net | (20,819 | ) | (69,371 | ) | ||||
| Payments for investments, net of sales and maturities | (391,551 | ) | (172,052 | ) | ||||
| Payments for acquisitions, net of cash acquired | (1,690 | ) | (137,374 | ) | ||||
| Net cash flows from investing activities | (414,060 | ) | (378,797 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of stock | 360 | 7,233 | ||||||
| Payments for repurchase of stock | (201 | ) | (323,137 | ) | ||||
| Proceeds from issuance of debt, net | 543,409 | 668,409 | ||||||
| Payments for retirement of debt | (108,872 | ) | (423,872 | ) | ||||
| Excess tax benefit from stock compensation | (1,562 | ) | 387 | |||||
| Net cash flows from financing activities | 433,134 | (70,980 | ) | |||||
| Net change in cash and cash equivalents for current period | 64,742 | 177,579 | ||||||
| Cash and cash equivalents at beginning of period | 1,058,372 | 945,535 | ||||||
| Cash and cash equivalents at end of period | $ | 1,123,114 | $ | 1,123,114 | ||||
| Cash and Investments: | ||||||||
| Cash and cash equivalents | $ | 1,123,114 | $ | 1,123,114 | ||||
| Short-term investments | 338,129 | 338,129 | ||||||
| Long-term investments | 1,709,878 | 1,709,878 | ||||||
| Total cash and investments | $ | 3,171,121 | $ | 3,171,121 | ||||
| COVENTRY HEALTH CARE, INC. | ||||||||||||||||||||||||||||
| SELECTED OPERATING STATISTICS | ||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||
|
Total
2008 |
Q4 2008 |
Q3 2008 |
Q2 2008 |
Q1 2008 |
Total
2007 |
Total
2006 |
||||||||||||||||||||||
| Membership by Product (000s) | ||||||||||||||||||||||||||||
| Commercial Group Risk | 1,477 | 1,497 | 1,502 | 1,505 | 1,580 | 1,457 | ||||||||||||||||||||||
| Health Plan ASO | 714 | 720 | 765 | 761 | 750 | 621 | ||||||||||||||||||||||
| Other ASO | 633 | 641 | 645 | 646 | 783 | 866 | ||||||||||||||||||||||
| Total Commercial Division | 2,824 | 2,858 | 2,912 | 2,912 | 3,113 | 2,944 | ||||||||||||||||||||||
| Medicare Advantage | 380 | 377 | 372 | 319 | 283 | 80 | ||||||||||||||||||||||
| Medicare Part D | 931 | 910 | 874 | 853 | 704 | 687 | ||||||||||||||||||||||
| Total Medicare | 1,311 | 1,287 | 1,246 | 1,172 | 987 | 767 | ||||||||||||||||||||||
| Medicaid Risk | 371 | 386 | 493 | 488 | 480 | 373 | ||||||||||||||||||||||
| Individual | 122 | 117 | 111 | 104 | 93 | 23 | ||||||||||||||||||||||
| Total Indiv./Gov’t Division | 1,804 | 1,790 | 1,850 | 1,764 | 1,560 | 1,163 | ||||||||||||||||||||||
| Total Membership | 4,628 | 4,648 | 4,762 | 4,676 | 4,673 | 4,107 | ||||||||||||||||||||||
| Revenues by Product (000s) | ||||||||||||||||||||||||||||
| Commercial Group Risk | $ | 5,169,773 | $ | 1,294,554 | $ | 1,295,519 | $ | 1,291,560 | $ | 1,288,140 | $ | 4,785,095 | $ | 4,580,165 | ||||||||||||||
| Commercial ASO(1) | 351,699 | 96,832 | 86,402 | 82,323 | 86,142 | 410,071 | 418,304 | |||||||||||||||||||||
| Total Commercial Division | $ | 5,521,472 | 1,391,386 | 1,381,921 | 1,373,883 | 1,374,282 | 5,195,166 | 4,998,469 | ||||||||||||||||||||
| Medicare Risk | 4,024,946 | 1,039,130 | 995,987 | 997,406 | 992,423 | 2,871,605 | 1,484,548 | |||||||||||||||||||||
| Medicaid Risk | 1,087,189 | 259,926 | 260,060 | 285,024 | 282,179 | 928,259 | 762,093 | |||||||||||||||||||||
| Medicaid ASO | 179,526 | 43,130 | 49,593 | 43,191 | 43,612 | 185,490 | 184,503 | |||||||||||||||||||||
| Individual Risk | 234,792 | 62,826 | 60,519 | 57,892 | 53,555 | 104,673 | 30,495 | |||||||||||||||||||||
| Total Indiv./Gov’t Division | 5,526,453 | 1,405,012 | 1,366,159 | 1,383,513 | 1,371,769 | 4,090,027 | 2,461,639 | |||||||||||||||||||||
| Specialty Premium Revenue | 82,202 | 29,768 | 25,855 | 18,842 | 7,737 | - | - | |||||||||||||||||||||
| Specialty Services Revenue | 826,884 | 210,658 | 214,040 | 210,454 | 191,732 | 599,940 | 280,209 | |||||||||||||||||||||
| Specialty Division(1) | 909,086 | 240,426 | 239,895 | 229,296 | 199,469 | 599,940 | 280,209 | |||||||||||||||||||||
| Total Premiums | 10,598,902 | 2,686,204 | 2,637,940 | 2,650,724 | 2,624,034 | 8,689,633 | 6,857,301 | |||||||||||||||||||||
| Total Management Services | 1,358,109 | 350,620 | 350,035 | 335,968 | 321,486 | 1,195,501 | 883,016 | |||||||||||||||||||||
| Other/Eliminations | (43,365 | ) | (16,976 | ) | (12,690 | ) | (8,788 | ) | (4,912 | ) | (5,603 | ) | (6,561 | ) | ||||||||||||||
| Total Revenue | $ | 11,913,646 | $ | 3,019,848 | $ | 2,975,285 | $ | 2,977,904 | $ | 2,940,608 | $ | 9,879,531 | $ | 7,733,756 | ||||||||||||||
| Consolidated Coventry | ||||||||||||||||||||||||||||
| Operating Income % of Revenues | 5.2 | % | 4.3 | % | 5.6 | % | 4.2 | % | 6.6 | % | 9.4 | % | 10.9 | % | ||||||||||||||
| SGA % of Revenues | 17.5 | % | 18.5 | % | 17.3 | % | 16.7 | % | 17.3 | % | 18.1 | % | 17.3 | % | ||||||||||||||
|
|
||||||||||||||||||||||||||||
| Total Medical Liabilities (000s)(2) | $ | 1,243,620 | $ | 1,209,560 | $ | 1,126,396 | $ | 1,027,194 | $ | 996,859 | $ | 719,426 | ||||||||||||||||
|
Days in Claims Payable (DCP) (2) |
54.75 | 54.94 | 49.69 | 50.71 | 50.82 | 54.97 | ||||||||||||||||||||||
| Total Debt (millions) | $ | 1,902.5 | $ | 1,472.3 | $ | 1,472.3 | $ | 1,662.1 | $ | 1,662.0 | $ | 760.5 | ||||||||||||||||
| Total Capital (millions) | $ | 5,333.1 | $ | 4,779.3 | $ | 4,789.0 | $ | 4,949.5 | $ | 4,963.5 | $ | 3,713.5 | ||||||||||||||||
| Debt to Capital | 35.7 | % | 30.8 | % | 30.7 | % | 33.6 | % | 33.5 | % | 20.5 | % | ||||||||||||||||
| COVENTRY HEALTH CARE, INC. | ||||||||||||||||||||||||||||
| REVENUE AND MEDICAL COST STATISTICS | ||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||
|
|
Total
2008 |
Q4 2008 |
Q3 2008 |
Q2 2008 |
Q1 2008 |
Total
2007 |
Total
2006 |
|||||||||||||||||||||
| Revenue PMPM | ||||||||||||||||||||||||||||
| Health Plan Commercial Group Risk | $ | 286.30 | $ | 289.71 | $ | 286.73 | $ | 285.32 | $ | 283.50 | $ | 273.76 | $ | 260.69 | ||||||||||||||
| Medicare Advantage(3) | $ | 862.60 | $ | 862.79 | $ | 856.90 | $ | 879.79 | $ | 849.60 | $ | 837.69 | $ | 857.28 | ||||||||||||||
| Medicare Part D(4) | $ | 88.34 | $ | 89.16 | $ | 85.64 | $ | 89.92 | $ | 88.64 | $ | 99.57 | $ | 103.77 | ||||||||||||||
| Medicaid Risk | $ | 208.50 | $ | 228.33 | $ | 226.08 | $ | 193.59 | $ | 194.16 | $ | 183.77 | $ | 167.30 | ||||||||||||||
| MLR % | ||||||||||||||||||||||||||||
| Consolidated Total | 84.0 | % | 83.8 | % | 83.8 | % | 85.8 | % | 82.5 | % | 79.6 | % | 79.3 | % | ||||||||||||||
| Health Plan Commercial Group Risk | 81.7 | % | 83.2 | % | 82.3 | % | 82.7 | % | 78.8 | % | 78.3 | % | 77.8 | % | ||||||||||||||
| Medicare Advantage | 89.0 | % | 90.9 | % | 88.4 | % | 93.2 | % | 82.8 | % | 80.5 | % | 79.4 | % | ||||||||||||||
| Medicare Part D | 84.1 | % | 58.8 | % | 78.5 | % | 86.0 | % | 103.2 | % | 78.1 | % | 84.5 | % | ||||||||||||||
| Medicaid Risk | 85.3 | % | 85.9 | % | 84.2 | % | 86.4 | % | 84.4 | % | 87.3 | % | 85.6 | % | ||||||||||||||
Explanatory Notes
1) The Specialty Business Division includes revenue from the rental network line of business (previously reported in the Commercial Business Division) effective January 1, 2008. Prior period balances have been reclassified for consistency.
2) "Total Medical Liabilities” and "Days in Claims Payable” are calculated consistently with prior disclosures to include the results from health plan and Medicare Advantage PFFS businesses.
3) Revenue PMPM excludes the impact of revenue ceded to external parties.
4) Revenue PMPM excludes the impact of CMS risk-share premium adjustments and revenue ceded to external parties.
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