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Anthem Reports Third Quarter 2021 Results, Raises Full Year Outlook

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  • ANTM
  • Third quarter GAAP net income was $6.13 per share, including net negative adjustment items of $0.66 per share. Adjusted net income was $6.79* per share.

  • Operating revenue grew by 16.0% over the prior year quarter to $35.5 billion, or 17.5% adjusted for the repeal of the health insurance tax.

  • Medical enrollment increased by 2.4 million members year over year and 730 thousand members in the third quarter to 45.1 million members.

  • Fourth quarter 2021 dividend of $1.13 per share declared to shareholders.

  • Raising full year adjusted net income outlook from greater than $25.50* per share to greater than $25.85* per share.

INDIANAPOLIS, October 20, 2021--(BUSINESS WIRE)--Anthem, Inc. (NYSE: ANTM) reported third quarter 2021 results reflecting strong financial performance.

"Our deep connection to the communities we serve, commitment to advancing a digital platform for health and our differentiated approach to addressing the whole health of the people we serve has underpinned our strong performance despite the challenging environment due to COVID," said Gail Boudreaux, President and CEO. "The strong growth we saw across all of our benefits business in the third quarter demonstrates that our core offerings, as well as additional innovative products and services continue to resonate in the market. We believe the momentum we are seeing and our ability to deliver on our strategy will be further accelerated by recent changes in our leadership."

*Refer to GAAP reconciliation tables.

CONSOLIDATED HIGHLIGHTS

Earnings Per Share: GAAP net income was $6.13 per share in the third quarter, including net negative adjustment items of $0.66 per share. Adjusted net income was $6.79* per share.

*Please refer to the GAAP reconciliation tables.

Membership: Medical enrollment totaled approximately 45.1 million members at September 30, 2021, an increase of 2.4 million lives, or 5.7 percent from the prior year quarter. Government Business enrollment increased by 2.3 million lives compared to the prior year quarter, primarily driven by organic growth in the Medicaid business, aided by the temporary suspension of eligibility recertification efforts in our markets, the acquisition of MMM, the launch of HealthyBlue in North Carolina, and organic growth in our Medicare Advantage business. Commercial & Specialty Business enrollment increased by 162 thousand lives compared to the prior year quarter primarily driven by strong risk-based membership growth, partially offset by in-group attrition in the group fee-based business as a result of the economic environment.

During the third quarter of 2021, medical enrollment increased sequentially by 730 thousand lives, driven by the launch of HealthyBlue in North Carolina, incremental growth in the Medicaid business, and sales in excess of lapses in our Commercial risk-based businesses, partially offset by in-group attrition in the group fee-based business.

Operating Revenue: Operating revenue was $35.5 billion in the third quarter of 2021, an increase of $4.9 billion, or 16.0 percent, from the prior year quarter and 17.5 percent after adjusting for the repeal of the health insurance tax in 2021. The increase was driven by higher premium revenue due to growth in Medicaid and Medicare and growth in pharmacy product revenue related to IngenioRx, partially offset by the repeal of the health insurance tax.

Benefit Expense Ratio: The benefit expense ratio was 87.7 percent in the third quarter of 2021, an increase of 90 basis points versus the prior year quarter and a decrease of 50 basis points after adjusting for the repeal of the health insurance tax in 2021. Excluding the impact of the repeal of the health insurance tax, the decrease was primarily driven by unfavorable rate adjustments in our Medicaid business in the third quarter of 2020.

Medical claims reserves established at December 31, 2020 developed better than the Company’s expectations during the third quarter of 2021, with the majority offset by rebates, risk-corridors and other related mechanisms.

Days in Claims Payable: Days in Claims Payable was 46.8 days as of September 30, 2021, a decrease of 1.3 days from June 30, 2021 and an increase of 5.7 days as compared to September 30, 2020. The timing of the acquisitions of MMM and myNEXUS increased Days in Claims Payable at June 30, 2021. Normalizing for timing impacts associated with these acquisitions, Days in Claims payable would have increased by 0.2 days sequentially.

SG&A Expense Ratio: The SG&A expense ratio was 11.1 percent in the third quarter of 2021, a decrease of 620 basis points from 17.3 percent in the third quarter of 2020, primarily driven by the absence of charges related to business optimization and the BCBSA litigation settlement taken in the third quarter of 2020, growth in operating revenue, and the repeal of the health insurance tax in 2021, partially offset by increased spend to support growth.

Operating Cash Flow: Operating cash flow was $2.5 billion, or 1.7 times net income in the third quarter of 2021, an increase of $3.7 billion as compared to the prior year quarter. The year-on-year increase was primarily driven by outflows in the third quarter of 2020 which did not repeat in 2021, principally the payment of the health insurance tax as well as estimated Federal income tax payments which were deferred from the second quarter of 2020, as was permitted by the IRS.

Share Repurchase Program: During the third quarter of 2021, the Company repurchased 1.2 million shares of its common stock for $450 million, at a weighted average price of $378.85. As of September 30, 2021, the Company had approximately $4.7 billion of Board-approved share repurchase authorization remaining.

Cash Dividend: During the third quarter of 2021, the Company paid a quarterly dividend of $1.13 per share, representing a distribution of cash totaling $276 million.

On October 19, 2021, the Audit Committee declared a fourth 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 fourth quarter dividend is payable on December 21, 2021 to shareholders of record at the close of business on December 3, 2021.

Investment Portfolio & Capital Position: During the third quarter of 2021, the Company recorded net realized losses of $61 million. During the third quarter of 2020, the Company recorded net realized gains of $229 million. These amounts are excluded from adjusted earnings per share.

As of September 30, 2021, the Company’s net unrealized gain position in the investment portfolio was $878 million, consisting primarily of fixed maturity securities. As of September 30, 2021 cash and investments at the parent company totaled approximately $1.4 billion.

REPORTABLE SEGMENTS

Anthem, Inc. has four reportable segments: Commercial & Specialty Business (comprised of Individual, Group risk-based, Group fee-based, and BlueCard 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 September 30

Nine Months Ended September 30

2021

2020

Change

2021

2020

Change

Operating Revenue

Commercial & Specialty Business

$9,863

$9,326

5.8

%

$28,904

$27,476

5.2

%

Government Business

21,658

18,101

19.7

%

61,007

52,809

15.5

%

IngenioRx

6,549

5,582

17.3

%

18,630

16,048

16.1

%

Other

2,670

1,798

48.5

%

7,557

4,277

76.7

%

Eliminations

(5,192)

(4,158)

NM2

(15,173)

(11,335)

NM2

Total Operating Revenue1

$35,548

$30,649

16.0

%

$100,925

$89,275

13.0

%

Operating Gain (Loss)3

Commercial & Specialty Business

$620

($234)

NM2

$2,679

$2,558

4.7

%

Government Business

967

246

293.1

%

2,313

2,275

1.7

%

IngenioRx

445

345

29.0

%

1,257

998

26.0

%

Other

27

(156)

NM2

52

(76)

NM2

Total Operating Gain1

$2,059

$201

924.4

%

$6,301

$5,755

9.5

%

Operating Margin

Commercial & Specialty Business

6.3

%

(2.5)

%

880 bp

9.3

%

9.3

%

— bp

Government Business

4.5

%

1.4

%

310 bp

3.8

%

4.3

%

(50) bp

IngenioRx

6.8

%

6.2

%

60 bp

6.7

%

6.2

%

50 bp

Total Operating Margin1

5.8

%

0.7

%

510 bp

6.2

%

6.4

%

(20) bp

1.

See "Basis of Presentation."

2.

"NM" = calculation not meaningful.

3.

Operating gain for the three months ended September 30, 2020 included $607 related to business optimization charges; $299 for Commercial & Specialty Business; $183 for the Government Business; $3 for IngenioRx; and $122 for the Other segment. Operating gain for the three months ended September 30, 2020 included $594 related to the BCBSA litigation settlement accrual; $566 for the Commercial & Specialty Business and $28 for the Government Business.

Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled $620 million in the third quarter of 2021, an increase of $854 million from an operating loss of $234 million in the third quarter of 2020. The increase was primarily attributable to BCBSA litigation settlement and business optimization charges taken in the third quarter of 2020.

Government Business: Operating gain in the Government Business segment was $967 million in the third quarter of 2021, an increase of $721 million from $246 million in the third quarter of 2020. The increase was primarily attributable to the impact of negative rate adjustments in the Medicaid business in the third quarter of 2020 associated with COVID-19, BCBSA litigation settlement and business optimization charges taken in the third quarter of 2020, and membership growth in the Medicaid and Medicare businesses, including growth resulting from the acquisition of MMM.

IngenioRx: Operating gain was $445 million in the third quarter of 2021, an increase of $100 million, or 29.0 percent, from $345 million in the third quarter of 2020. The increase was driven by growth in integrated medical and pharmacy membership.

Other: The Company reported an operating gain of $27 million in the Other segment for the third quarter of 2021, compared with an operating loss of $156 million in the prior year quarter. The increase was primarily driven by business optimization charges taken in the third quarter of 2020 and a decline in unallocated corporate expenses.

OUTLOOK

Full Year 2021:

  • GAAP net income is now expected to be greater than $24.70 per share, including approximately $1.15 per share of net unfavorable items. Excluding these items, adjusted net income is now expected to be greater than $25.85* per share.

  • Operating cash flow is now expected to be greater than $6.0 billion.

  • Investment income is now expected to be approximately $1.2 billion.

* Refer to the GAAP reconciliation tables.

Basis of Presentation

  1. 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 to the GAAP reconciliation tables.

  2. 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 Daylight Time ("EDT") to discuss the company’s third 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)

800-945-7761 (Domestic Replay)

312-470-0178 (International)

203-369-3954 (International Replay)

The access code for today's conference call is 3972058. The replay will be available from 11:30 a.m. EDT today, until the end of the day on November 19, 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 117 million people, including more than 45 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

September 30,
2021

September 30,
2020

June 30,
2021

September 30,
2020

June 30,
2021

Commercial & Specialty Business

Individual

769

701

738

9.7

%

4.2

%

Group Risk-Based

3,946

3,774

3,851

4.6

%

2.5

%

Commercial Risk-Based

4,715

4,475

4,589

5.4

%

2.7

%

BlueCard®

6,166

6,106

6,235

1.0

%

(1.1

)%

Group Fee-Based

19,370

19,508

19,372

(0.7

)%

%

Commercial Fee-Based

25,536

25,614

25,607

(0.3

)%

(0.3

)%

Total Commercial & Specialty Business

30,251

30,089

30,196

0.5

%

0.2

%

Government Business

Medicare Advantage

1,853

1,416

1,824

30.9

%

1.6

%

Medicare Supplement

947

933

936

1.5

%

1.2

%

Total Medicare

2,800

2,349

2,760

19.2

%

1.4

%

Medicaid

10,391

8,569

9,754

21.3

%

6.5

%

Federal Employees Health Benefits

1,629

1,618

1,631

0.7

%

(0.1

)%

Total Government Business

14,820

12,536

14,145

18.2

%

4.8

%

Total Medical Membership

45,071

42,625

44,341

5.7

%

1.6

%

Other Membership

Life and Disability Members

4,695

5,029

4,732

(6.6

)%

(0.8

)%

Dental Members

6,637

6,356

6,606

4.4

%

0.5

%

Dental Administration Members

1,486

1,315

1,497

13.0

%

(0.7

)%

Vision Members

7,974

7,487

7,819

6.5

%

2.0

%

Medicare Part D Standalone Members

438

405

433

8.1

%

1.2

%

Anthem, Inc.

Consolidated Statements of Income

(Unaudited)

(In millions, except per share data)

Three Months Ended
September 30

2021

2020

Change

Revenues

Premiums

$

30,395

$

26,392

15.2

%

Product revenue

3,353

2,598

29.1

%

Administrative fees and other revenue

1,800

1,659

8.5

%

Total operating revenue

35,548

30,649

16.0

%

Net investment income

335

280

19.6

%

Net realized (losses) gains on financial instruments

(61

)

229

NM

Total revenues

35,822

31,158

15.0

%

Expenses

Benefit expense

26,645

22,921

16.2

%

Cost of products sold

2,898

2,222

30.4

%

Selling, general and administrative expense

3,946

5,305

(25.6

)%

Interest expense

201

198

1.5

%

Amortization of other intangible assets

136

93

46.2

%

Loss on extinguishment of debt

30

NM

Total expenses

33,826

30,769

9.9

%

Income before income tax expense

1,996

389

413.1

%

Income tax expense

494

167

195.8

%

Net income

1,502

222

576.6

%

Net loss attributable to noncontrolling interests

7

NM

Shareholders' net income

$

1,509

$

222

579.7

%

Shareholders' net income per diluted share

$

6.13

$

0.87

604.6

%

Diluted shares

246.0

254.2

(3.2

)%

Benefit expense as a percentage of premiums

87.7

%

86.8

%

90

bp

Selling, general and administrative expense as a percentage of total operating revenue

11.1

%

17.3

%

(620

)bp

Income before income tax expense as a percentage of total revenue

5.6

%

1.2

%

440

bp

"NM" = calculation not meaningful

Anthem, Inc.

Consolidated Statements of Income

(Unaudited)

(In millions, except per share data)

Nine Months Ended

September 30

2021

2020

Change

Revenues

Premiums

$

86,604

$

77,001

12.5

%

Product revenue

9,132

7,485

22.0

%

Administrative fees and other revenue

5,189

4,789

8.4

%

Total operating revenue

100,925

89,275

13.0

%

Net investment income

1,026

591

73.6

%

Net realized gains on financial instruments

107

177

(39.5

)%

Total revenues

102,058

90,043

13.3

%

Expenses

Benefit expense

75,107

63,957

17.4

%

Cost of products sold

7,825

6,431

21.7

%

Selling, general and administrative expense

11,692

13,132

(11.0

)%

Interest expense

598

593

0.8

%

Amortization of other intangible assets

306

269

13.8

%

Loss on extinguishment of debt

5

34

(85.3

)%

Total expenses

95,533

84,416

13.2

%

Income before income tax expense

6,525

5,627

16.0

%

Income tax expense

1,555

1,606

(3.2

)%

Net income

4,970

4,021

23.6

%

Net income attributable to noncontrolling interests

(3

)

NM

Shareholders' net income

$

4,967

$

4,021

23.5

%

Shareholders' net income per diluted share

$

20.09

$

15.75

27.6

%

Diluted shares

247.2

255.3

(3.2

)%

Benefit expense as a percentage of premiums

86.7

%

83.1

%

360

bp

Selling, general and administrative expense as a percentage of total operating revenue

11.6

%

14.7

%

(310

)bp

Income before income tax expense as a percentage of total revenue

6.4

%

6.2

%

20

bp

"NM" = calculation not meaningful

Anthem, Inc.

Consolidated Balance Sheets

(In millions)

September 30,
2021

December 31,
2020

Assets

(Unaudited)

Current assets:

Cash and cash equivalents

$

5,490

$

5,741

Fixed maturity securities

26,348

23,433

Equity securities, current

2,119

1,559

Premium receivables

6,008

5,279

Self-funded receivables

3,349

2,849

Other receivables

3,450

2,830

Other current assets

5,140

4,060

Total current assets

51,904

45,751

Long-term investments:

Fixed maturity securities

625

562

Other invested assets

4,959

4,285

Property and equipment, net

3,835

3,483

Goodwill

24,184

21,691

Other intangible assets

10,749

9,405

Other noncurrent assets

1,804

1,438

Total assets

$

$

86,615

Liabilities and equity

Liabilities

Current liabilities:

Medical claims payable

$

13,562

$

11,359

Other policyholder li...