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- Net income was $1.43 per share, including net investment losses of $0.07 per share
- Medical membership exceeded 34.2 million at June 30, 2009
- Operating cash flow totaled $1.6 billion, or 1.2 times net income, for the
six months ended June 30, 2009
- Full year 2009 net income now expected to be in the range of $5.06 - $5.12
per share, including net investment losses of $0.54 per share
INDIANAPOLIS, July 29 /PRNewswire-FirstCall/ -- WellPoint, Inc. (NYSE:
WLP) today announced that second quarter 2009 net income was $693.5 million,
or $1.43 per share, including net investment losses of $0.07 per share. Net
income in the second quarter of 2008 was $750.5 million, or $1.44 per share,
which included net investment losses of $0.03 per share.
"We are pleased with our earnings per share results for the second
quarter. We are managing diligently through these turbulent economic times and
are currently taking a number of steps that will improve our future
performance," said Angela F. Braly, president and chief executive officer. "We
are in the midst of the 2010 National Account selling season and are having an
outstanding sales year. With our leading value proposition of broad networks
and superior discounts, we already have 14 new or expansion sales for 2010 and
expect another year of significant membership growth in that business."
"We also continue to advocate responsible health care reform. We are
working with policy-makers on sustainable solutions to increase access to
coverage while improving both the cost and quality of health care," added
Braly.
"We are providing better customer service through faster claims payments,
as evidenced by our claims inventory levels, which have declined by 39 percent
from the second quarter of last year and by 24 percent since year-end 2008,"
said Wayne S. DeVeydt, executive vice president and chief financial officer.
"Our subsidiaries remain very well-capitalized with statutory capital levels
$5.6 billion higher than state regulatory requirements, and $2.4 billion
higher than Blue Cross and Blue Shield requirements as of June 30, 2009. We
now expect operating cash flow in excess of $2.9 billion for the full year of
2009 and earnings per share to be in the range of $5.06 - $5.12, including net
investment losses of $0.54 per share."
CONSOLIDATED HIGHLIGHTS
Membership: Medical enrollment totaled 34.2 million members at June 30,
2009, a decrease of 1.1 million members, or 3.0 percent, from 35.3 million at
June 30, 2008. The decline in membership was most significant in the Local
Group business, which experienced a 734,000-member reduction from the prior
year quarter, primarily due to in-group enrollment losses caused by the rise
in unemployment. Enrollment in State Sponsored business declined by 300,000
members, as the Company withdrew from certain programs for which
actuarially-sound reimbursement could not be obtained. Membership declines
were also experienced in the Individual and Senior businesses. These
enrollment declines were partially offset by growth of more than 200,000
members in the National business.
Medical membership declined by 338,000, or 1.0 percent, in the second
quarter of 2009. The decline in membership occurred almost entirely in the
Commercial segment, reflecting continued employer workforce reductions. The
Company experienced net negative in-group change of 254,000 members in its
Commercial business during the quarter. The Company continues to introduce
new, more affordable products to the marketplace and expand membership
retention programs through initiatives designed to minimize the impact of
rising unemployment on its businesses.
Operating Revenue: Operating revenue was $15.3 billion in the second
quarter of 2009, a decrease of 1.4 percent from $15.5 billion in the second
quarter of 2008. The revenue decline resulted primarily from lower fully
insured Commercial enrollment in 2009, partially offset by premium rate
increases.
Benefit Expense Ratio: The benefit expense ratio was 82.9 percent in the
second quarter of 2009, a decrease of 40 basis points from 83.3 percent in the
prior year quarter. The decrease was driven by the Consumer reporting segment
and included higher-than-anticipated favorable prior year reserve development.
The Consumer benefit expense ratio also improved due to plan design and
pricing changes in the Medicare Advantage product portfolio, and the Company's
withdrawal from certain State Sponsored programs.
These declines in the benefit expense ratio were partially offset by an
increase in the ratio for Local Group business, particularly in California and
Ohio, which have been among the states most impacted by the current recession.
The Local Group benefit expense ratio was unfavorably impacted by business mix
changes and a slight increase in health care utilization.
Premium and Cost Trends: Trends represent Local Group fully insured
business.
The Company continues to project that underlying medical cost trends will
be in the range of 8.0 percent, plus or minus 50 basis points, for full year
2009. Unit cost increases continue to be the primary driver of medical cost
trends, however the Company has recognized a slight increase in utilization
through the first six months of 2009. As a result of this observation and
expectations for elevated flu-related claims this fall, the Company believes
that full year medical cost trend will be closer to the higher end of the
guidance range. The Company continues to price its business so that expected
premium yield exceeds total cost trend, where total cost trend includes
medical costs and selling, general and administrative ("SG&A") expense.
Days in Claims Payable: Days in Claims Payable ("DCP") as of June 30,
2009, was 45.9 days, a decline of 1.8 days from 47.7 days as of December 31,
2008, and June 30, 2008. The decrease in DCP reflected a lower Medical Claims
Payable balance resulting from the reduction in claims inventories, lower
fully insured enrollment and higher-than-anticipated favorable prior year
reserve development. Total medical claims inventory declined by 39 percent
from June 30, 2008, and by 24 percent from December 31, 2008, while fully
insured membership declined by 6.2 percent and 4.8 percent, respectively.
Claims reserves were reduced by an estimated $100.0 million on a year-to-date
basis through June 30, 2009, due to the higher-than-expected prior year
development, predominately in the Consumer reporting segment.
SG&A Expense Ratio: The SG&A expense ratio was 15.4 percent in the second
quarter of 2009, an increase of 110 basis points from 14.3 percent in the
second quarter of 2008. The increase was driven primarily by higher
compensation costs and increased spending for technology and service
initiatives.
Operating Cash Flow: Operating cash flow for the six months ended June 30,
2009, was $1.6 billion, or 1.2 times net income. Operating cash flow for the
six months ended June 30, 2008, totaled $1.2 billion, or 0.9 times net income.
The increase in operating cash flow was due to changes in provider advances,
decreased payments for taxes and incentive compensation, and increased
operating earnings in 2009, partially offset by higher spending for technology
and service initiatives.
Share Repurchase Program: During the second quarter of 2009, the Company
repurchased 9.8 million shares of its common stock for $437.0 million, or an
average price of $44.78. During the first six months of 2009, the Company
repurchased 27.4 million shares of its common stock for $1.1 billion, or an
average price of $40.77. As of June 30, 2009, the Company's remaining
Board-approved share repurchase authorization was approximately $1.4 billion.
The Company will continue to evaluate future share repurchase activity subject
to market conditions and in connection with the sale of its NextRx
subsidiaries, which is expected to close in the second half of 2009.
Investment Portfolio & Capital Position: During the second quarter of
2009, the Company recorded net investment losses of $58.3 million pre-tax,
consisting of other-than-temporary impairments totaling $74.0 million, which
were partially offset by net realized gains of $15.7 million.
As of June 30, 2009, the Company's net unrealized loss position was $34.4
million, consisting of net unrealized losses on fixed maturity securities of
$52.7 million, partially offset by net unrealized gains on equity securities
of $18.3 million.
As of June 30, 2009, statutory capital levels in the Company's insurance
subsidiaries exceeded Blue Cross and Blue Shield Association requirements by
approximately $2.4 billion and state regulatory levels by approximately $5.6
billion. Cash and investments at the parent company totaled approximately
$1.4 billion.
REPORTABLE SEGMENTS
WellPoint, Inc. has the following reportable segments: Commercial
Business, which includes the Local Group, National, UniCare, and Specialty
Products lines of business; Consumer Business, which includes the Individual,
Senior, and State Sponsored lines of business; and Other, which includes
Comprehensive Health Solutions (including the Company's NextRx PBM operation),
Federal Employee Program or "FEP" business, National Government Services,
inter-segment sales and expense eliminations, and corporate expenses not
allocated to the other reportable segments.
Operating revenue and operating gain are the key measures used by
management to evaluate performance in each segment.
WellPoint, Inc.
Reportable Segment Highlights
(Unaudited)
(In millions) Three Months Ended June 30 Six Months Ended June 30
--------------------------
------------------------
2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Operating Revenue
Commercial
Business $9,339.8 $9,517.1 (1.9%) $18,707.3 $19,005.3 (1.6%)
Consumer
Business 4,090.5 4,144.0 (1.3%) 8,125.9 8,244.0 (1.4%)
Other Business:
External
Customers 1,835.5 1,815.9 1.1% 3,731.3 3,594.3 3.8%
Intersegment
Revenue 770.0 645.0 19.4% 1,485.2 1,258.5 18.0%
Intersegment
Eliminations (770.0) (645.0) (19.4%) (1,485.2) (1,258.5) (18.0%)
------ ------ -------- --------
Other 1,835.5 1,815.9 1.1% 3,731.3 3,594.3 3.8%
------- ------- ------- -------
Total Operating
Revenue 15,265.8 15,477.0 (1.4%) 30,564.5 30,843.6 (0.9%)
Operating Gain
Commercial
Business $582.8 $846.5 (31.2%) $1,485.5 $1,755.3 (15.4%)
Consumer
Business 382.1 227.8 67.7% 600.8 107.6 458.4%
Other 123.8 110.0 12.5% 235.4 204.0 15.4%
Operating Margin
Commercial
Business 6.2% 8.9% (270)bp 7.9% 9.2% (130)bp
Consumer
Business 9.3% 5.5% 380bp 7.4% 1.3% 610bp
Commercial Business: Operating gain for the Commercial Business segment
was $582.8 million in the second quarter of 2009, a decrease of 31.2 percent
compared with $846.5 million in the second quarter of 2008. The decline
resulted primarily from the reduction in Commercial fully insured enrollment
and an increase in the benefit expense ratio for Local Group business,
particularly in California and Ohio. Commercial enrollment declined by
593,000, or 2.1 percent, from June 30, 2008, reflecting the rise in
unemployment. The recession has also unfavorably impacted the Company's Local
Group benefit expense ratio due to business mix changes and a slight increase
in health care utilization. The Company is refining its product offerings,
expanding membership retention programs and implementing pricing actions to
favorably impact its Local Group business.
Consumer Business: Operating gain for the Consumer Business segment was
$382.1 million in the second quarter of 2009, an increase of 67.7 percent
compared with $227.8 million in the second quarter of 2008. The growth in
earnings was driven primarily by operating improvements in the Senior business
resulting from product portfolio changes and disciplined pricing. Performance
in the Company's State Sponsored operations also improved from the prior year
quarter, due in part to the withdrawal from certain unprofitable state
programs. The Company also recognized higher-than-anticipated favorable prior
year reserve development on a year-to-date basis through June 30, 2009.
Other: Operating gain in the Other segment was $123.8 million in the
second quarter of 2009, an increase of 12.5 percent compared with $110.0
million in the second quarter of 2008. The increase was driven by growth in
the Company's NextRx pharmacy benefit management operation. The Company
transferred approximately one million members to its NextRx business from an
outside vendor, effective January 1, 2009.
OUTLOOK
Full Year 2009 (assumes no impact from the Express Scripts transaction):
-- The Company now expects net income to be in the range of $5.06 - $5.12
per share, including net investment losses of $0.54 per share. This
projection includes no investment gains or losses beyond those
recorded during the six months ended June 30, 2009.
-- Year-end medical enrollment is now expected to be approximately 33.6
million members.
-- Operating revenue is now expected to total approximately $60.6
billion.
-- The benefit expense ratio is now expected to be approximately 82.9
percent.
-- The SG&A expense ratio is now expected to be approximately 15.7
percent.
-- Operating cash flow is now expected to exceed $2.9 billion.
Basis of Presentation
1. Operating gain is defined as operating revenue less benefit expense,
selling expense, general and administrative expense, and cost of drugs.
Operating gain is used to analyze profit or loss on a segment basis.
Consolidated operating gain is a non-GAAP measure.
2. Operating margin is defined as operating gain divided by operating
revenue.
3. Certain prior period amounts have been reclassified to conform to the
current period presentation.
4. The Company adopted FASB Staff Position No. FAS 115-2 and FAS 124-2
(the "FSP") on April 1, 2009. The FSP provides new guidance on the
recognition and presentation of other-than-temporary impairments. Upon
adoption, the Company recorded a favorable after-tax cumulative-effect
adjustment of $88.9 million as of the beginning of the period to
reclassify the non-credit component of previously recognized
other-than-temporary impairments from retained earnings to accumulated
other comprehensive income. The Company also reclassified most of its
investments from long-term to current assets in connection with the
adoption of this FSP.
Conference Call and Webcast
Management will host a conference call and webcast today at 8:30 a.m.
Eastern Daylight Time ("EDT") to discuss its second quarter earnings results
and updated outlook. The conference call should be accessed at least 15
minutes prior to the start of the call with the following numbers:
888-423-3268 (Domestic) 800-475-6701 (Domestic Replay)
651-291-5254 (International) 320-365-3844 (International Replay)
An access code is not required for today's conference call. The access
code for the replay is 977146. The replay will be available from 1:45 p.m.
EDT today until the end of the day on August 12, 2009. The call will also be
available through a live webcast at www.wellpoint.com under "Investor Info."
A webcast replay will be available following the call.
About WellPoint, Inc.
WellPoint works to simplify the connection between Health, Care and Value.
We help to improve the health of our communities, deliver better care to
members, and provide greater value to our customers and shareholders.
WellPoint is the nation's largest health benefits company, with approximately
34 million members in its affiliated health plans. As an independent licensee
of the Blue Cross and Blue Shield Association, WellPoint serves members as the
Blue Cross licensee for California; the Blue Cross and Blue Shield licensee
for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri
(excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New
York (as the Blue Cross Blue Shield licensee in 10 New York City metropolitan
and surrounding counties and as the Blue Cross or Blue Cross Blue Shield
licensee in selected upstate counties only), Ohio, Virginia (excluding the
Northern Virginia suburbs of Washington, D.C.), and Wisconsin. In a majority
of these services areas, WellPoint does business as Anthem Blue Cross, Anthem
Blue Cross Blue Shield or Empire Blue Cross Blue Shield (in the New York
service areas). WellPoint also serves customers throughout the country as
UniCare. Additional information about WellPoint is available at
www.wellpoint.com.
WellPoint, Inc.
Membership & Prescription Volume Summary
(Unaudited and in Thousands)
Change from
-----------
Medical June 30, December 31, June 30, December 31, June 30,
Membership 2009 2008 2008 2008 2008
----------- ---- ---- ---- ---- ----
Customer Type
Local Group 15,916 16,632 16,650 (4.3%) (4.4%)
National
Accounts 6,904 6,720 6,732 2.7% 2.6%
BlueCard 4,812 4,736 4,782 1.6% 0.6%
----- ----- -----
Total
National 11,716 11,456 11,514 2.3% 1.8%
Individual 2,191 2,272 2,344 (3.6%) (6.5%)
Senior 1,234 1,304 1,304 (5.4%) (5.4%)
State
Sponsored 1,777 1,992 2,077 (10.8%) (14.4%)
FEP 1,387 1,393 1,385 (0.4%) 0.1%
----- ----- -----
Total
Medical
Membership 34,221 35,049 35,274 (2.4%) (3.0%)
====== ====== ======
Funding
Arrangement
Self-Funded 18,479 18,520 18,499 (0.2%) (0.1%)
Fully-Insured 15,742 16,529 16,775 (4.8%) (6.2%)
------ ------ ------
Total
Medical
Membership 34,221 35,049 35,274 (2.4%) (3.0%)
====== ====== ======
Reportable
Segment
Commercial 27,821 28,304 28,414 (1.7%) (2.1%)
Consumer 5,013 5,352 5,475 (6.3%) (8.4%)
Other 1,387 1,393 1,385 (0.4%) 0.1%
----- ----- -----
Total
Medical
Membership 34,221 35,049 35,274 (2.4%) (3.0%)
====== ====== ======
Other
Membership
-----------
Behavioral
Health
Membership 22,998 23,568 23,410 (2.4%) (1.8%)
Life and
Disability
Membership 5,437 5,477 5,553 (0.7%) (2.1%)
Dental
Membership(1) 4,331 4,560 4,665 (5.0%) (7.2%)
Managed Dental
Membership(1) 4,041 - - - -
Vision
Membership 2,826 2,614 2,574 8.1% 9.8%
Medicare Part
D Membership 1,667 1,870 1,854 (10.9%) (10.1%)
PBM Prescription
Volume Paid
(Quarterly)
----------------
Retail
Scripts 58,938 60,858 59,782 (3.2%) (1.4%)
Mail Order
Scripts 6,696 6,485 6,550 3.3% 2.2%
Specialty
Pharmacy
Scripts 200 199 165 0.5% 21.2%
--- --- ---
Total Scripts 65,834 67,542 66,497 (2.5%) (1.0%)
====== ====== ======
(1) Dental Membership and Managed Dental Membership as of June 30, 2009,
includes DeCare members acquired on April 9, 2009. Managed Dental
Membership includes DeCare members for which we provide administrative
services only.
WellPoint, Inc.
Consolidated Statements of Income
(Unaudited)
Three Months Ended
(In millions, except per share data) June 30
-------
2009 2008 Change
---- ---- ------
Revenues
Premiums $14,123.3 $14,344.9 (1.5%)
Administrative fees 976.8 966.0 1.1%
Other revenue 165.7 166.1 (0.2%)
----- -----
Total operating revenue 15,265.8 15,477.0 (1.4%)
Net investment income 205.7 217.6 (5.5%)
Net realized gains on investments 15.7 93.2 (83.2%)
Other-than-temporary impairment
losses on investments:
Total other-than-temporary
impairment losses
on investments (107.8) (121.0) 10.9%
Portion of other-than-temporary
impairment losses
recognized in other
comprehensive income 33.8 - -
---- ----
Net other-than-temporary
impairment losses
recognized in income (74.0) (121.0) 38.8%
----- ------
Total revenues 15,413.2 15,666.8 (1.6%)
Expenses
Benefit expense 11,712.3 11,955.6 (2.0%)
Selling, general and
administrative expense
Selling expense 421.2 445.1 (5.4%)
General and administrative expense 1,922.3 1,773.5 8.4%
------- -------
Total selling, general and
administrative expense 2,343.5 2,218.6 5.6%
Cost of drugs 121.3 118.5 2.4%
Interest expense 117.0 116.5 0.4%
Amortization of other intangible
assets 66.6 71.6 (7.0%)
---- ----
Total expenses 14,360.7 14,480.8 (0.8%)
Income before income taxes 1,052.5 1,186.0 (11.3%)
Income tax expense 359.0 435.5 (17.6%)
----- -----
Net income $693.5 $750.5 (7.6%)
====== ======
Net income per diluted share $1.43 $1.44 (0.7%)
===== =====
Diluted shares 486.3 522.6 (6.9%)
Benefit expense as a percentage
of premiums 82.9% 83.3% (40)bp
Selling, general and administrative
expense as a percentage of
total operating revenue 15.4% 14.3% 110bp
Income before income tax expense
as a percentage of total revenues 6.8% 7.6% (80)bp
WellPoint, Inc.
Consolidated Statements of Income
(Unaudited)
Six Months Ended
(In millions, per share data) June 30
-------
2009 2008 Change
---- ---- ------
Revenues
Premiums $28,326.5 $28,579.3 (0.9%)
Administrative fees 1,918.3 1,935.6 (0.9%)
Other revenue 319.7 328.7 (2.7%)
----- -----
Total operating revenue 30,564.5 30,843.6 (0.9%)
Net investment income 402.8 450.3 (10.5%)
Net realized (losses)
gains on investments (31.8) 124.5 NM (1)
Other-than-temporary impairment
losses on investments:
Total other-than-temporary
impairment losses
on investments (412.8) (197.9) (108.6%)
Portion of other-than-temporary
impairment losses
recognized in other
comprehensive income 33.8 - -
---- ----
Net other-than-temporary
impairment losses
recognized in income (379.0) (197.9) (91.5%)
------ ------
Total revenues 30,556.5 31,220.5 (2.1%)
Expenses
Benefit expense 23,300.5 24,072.1 (3.2%)
Selling, general and
administrative expense
Selling expense 853.2 889.4 (4.1%)
General and administrative expense 3,855.4 3,577.8 7.8%
------- -------
Total selling, general and
administrative expense 4,708.6 4,467.2 5.4%
Cost of drugs 233.7 237.4 (1.6%)
Interest expense 233.1 235.5 (1.0%)
Amortization of other intangible
assets 134.5 143.1 (6.0%)
----- -----
Total expenses 28,610.4 29,155.3 (1.9%)
Income before income taxes 1,946.1 2,065.2 (5.8%)
Income tax expense 672.2 726.6 (7.5%)
----- -----
Net income $1,273.9 $1,338.6 (4.8%)
======== ========
Net income per diluted share $2.59 $2.50 3.6%
===== =====
Diluted shares 492.2 535.1 (8.0%)
Benefit expense as a percentage
of premiums 82.3% 84.2% (190)bp
Selling, general and administrative
expense as a percentage of total
operating revenue 15.4% 14.5% 90bp
Income before income tax
expense as a percentage of
total revenues 6.4% 6.6% (20)bp
(1) "NM" = not meaningful
WellPoint, Inc.
Consolidated Balance Sheets
June 30, December 31,
(In millions) 2009 2008
-------------- --------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $1,724.6
$2,183.9
Investments available-for-sale,
at fair value:
Fixed maturity securities 14,765.9
1,564.8
Equity securities 851.1
1,088.0
Other invested assets, current 17.1 23.6
Accrued investment income 168.8 172.8
Premium and self-funded receivables 3,457.9
3,042.9
Other receivables 515.3 597.5
Income taxes receivable 59.1 159.9
Securities lending collateral 325.2 529.0
Deferred tax assets, net 681.6 766.6
Other current assets 1,141.9
1,141.0
Current assets held for sale 1,292.9
1,193.3
------- -------
Total current assets 25,001.4 12,463.3
Long-term investments
available-for-sale,
at fair value:
Fixed maturity securities 238.8
11,808.4
Equity securities 29.9
30.7
Other invested assets, long-term 749.5
703.2
Property and equipment, net 1,038.2 1,016.5
Goodwill 13,308.9 13,296.2
Other intangible assets 8,612.8 8,697.6
Other noncurrent assets 364.8 387.3
----- -----
Total assets $49,344.3 $48,403.2
========= =========
Liabilities and shareholders' equity
Liabilities
Current liabilities:
Policy liabilities:
Medical claims payable $5,905.5
$6,184.7
Reserves for future policy benefits 61.3
64.5
Other policyholder liabilities 1,549.5
1,626.8
-------
-------
Total policy liabilities 7,516.3
7,876.0
Unearned income 1,066.9
1,080.8
Accounts payable and accrued expenses 2,754.0 2,856.5
Security trades pending payable 54.0 5.8
Securities lending payable 330.9 529.0
Short-term borrowings 100.0 98.0
Current portion of long-term debt 558.1 909.7
Other current liabilities 1,687.8
1,340.3
Current liabilities held for sale 274.3 374.4
----- -----
Total current liabilities 14,342.3 15,070.5
Long-term debt, less current portion 8,513.7
7,833.9
Reserves for future policy
benefits, noncurrent 659.9
664.7
Deferred tax liability, net 2,302.2
2,051.3
Other noncurrent liabilities 1,273.3 1,351.1
------- -------
Total liabilities 27,091.4 26,971.5
Shareholders' equity
Common stock 4.8 5.0
Additional paid-in capital 16,031.9
16,843.0
Retained earnings 6,639.5
5,479.4
Accumulated other comprehensive loss (423.3)
(895.7)
------
------
Total shareholders' equity 22,252.9
21,431.7
--------
--------
Total liabilities and shareholders' equity $49,344.3 $48,403.2
========= =========
WellPoint, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30
----------------
(In millions) 2009 2008
---- ----
Operating activities
Net income $1,273.9 $1,338.6
Adjustments to reconcile net
income to net cash provided
by operating activities:
Net realized losses (gains)
on investments 31.8 (124.5)
Net other-than-temporary impairment
losses recognized in income 379.0 197.9
Loss on disposal of assets 0.9 0.5
Deferred income taxes 18.1 26.0
Amortization, net of accretion 225.0 238.2
Depreciation expense 52.3 51.9
Share-based compensation 76.7 89.5
Excess tax benefits from
share-based compensation (1.7) (13.6)
Changes in operating assets and
liabilities, net of effect of
business combinations:
Receivables, net (376.5) (612.9)
Other invested assets (19.0) 6.5
Other assets 33.3 (94.9)
Policy liabilities (367.3) 269.0
Unearned income (14.1) (59.8)
Accounts payable and
accrued expenses 28.3 (196.2)
Other liabilities 135.2 64.2
Income taxes 93.0 (35.1)
Other, net 0.7 14.1
--- ----
Net cash provided by operating activities 1,569.6 1,159.4
Investing activities
Purchases of fixed maturity securities (4,174.6) (4,000.4)
Proceeds from sales and maturities of
fixed maturity securities 3,006.6 4,875.7
Purchases of equity securities (160.3) (1,049.8)
Proceeds from sales of equity securities 420.1 792.8
Purchases of other invested assets (24.0) (88.7)
Proceeds from sales of other invested assets 2.2 20.8
Changes in securities lending collateral 198.1 138.7
Purchases of subsidiaries,
net of cash acquired (66.3) (106.5)
Proceeds from sales of subsidiaries,
net of cash sold - 5.0
Purchases of property and equipment (157.9) (156.0)
Proceeds from sales of property
and equipment 0.4 11.3
Other, net (3.2) -
---- ----
Net cash (used in) provided
by investing activities (958.9) 442.9
Financing activities
Net (repayment of) proceeds from
commercial paper borrowings (249.4) 196.2
Net proceeds from short-term borrowings 2.0 0.0
Proceeds from long-term borrowings 990.3 525.0
Repayment of long-term borrowings (393.2) (5.9)
Changes in securities lending payable (198.1) (138.7)
Changes in bank overdrafts (149.6) 104.5
Repurchase and retirement of common stock (1,118.2) (2,875.2)
Proceeds from exercise of employee stock
options and employee stock purchase plan 43.3 84.1
Excess tax benefits from share-based
compensation 1.7 13.6
--- ----
Net cash used in financing activities (1,071.2) (2,096.4)
-------- --------
Effects of foreign currency exchange rate
changes on cash and cash equivalents 1.2 -
Change in cash and cash equivalents (459.3) (494.1)
Cash and cash equivalents at beginning
of period 2,183.9 2,767.9
------- -------
Cash and cash equivalents at end of period $1,724.6 $2,273.8
======== ========
WellPoint, Inc.
Reconciliation of Medical Claims Payable
Six Months Ended
June 30 Years Ended December 31
-------------- ------------------------
(In millions) 2009 2008 2008 2007 2006
---- ---- ---- ---- ----
(Unaudited)
Gross medical
claims payable,
beginning of
period $6,184.7 $5,788.0 $5,788.0 $5,290.3 $4,853.4
Ceded medical
claims payable,
beginning of
period (60.3) (60.7) (60.7) (51.0) (27.7)
----- ----- ----- ----- -----
Net medical
claims payable,
beginning of
period 6,124.4 5,727.3 5,727.3 5,239.3 4,825.7
Business
combinations
and purchase
adjustments 2.8 - - 15.2 (6.4)
Net incurred
medical claims:
Current year 23,980.0 24,308.4 47,940.9 46,366.2 42,613.2
Prior years
(redundancies)(1) (719.7) (269.6) (263.2) (332.7) (617.7)
------ ------ ------ ------ ------
Total net incurred
medical claims 23,260.3 24,038.8 47,677.7 46,033.5 41,995.5
Net payments
attributable to:
Current year
medical claims 18,760.1 18,689.5 42,020.7 40,765.7 37,486.0
Prior years
medical claims 4,778.6 4,865.4 5,259.9 4,795.0 4,089.5
------- ------- ------- ------- -------
Total net payments 23,538.7 23,554.9 47,280.6 45,560.7 41,575.5
Net medical
claims payable,
end of period 5,848.8 6,211.2 6,124.4 5,727.3 5,239.3
Ceded medical
claims, end of
period 56.7 59.1 60.3 60.7 51.0
---- ---- ---- ---- ----
Gross medical
claims payable,
end of period $5,905.5 $6,270.3 $6,184.7 $5,788.0 $5,290.3
======== ======== ======== ======== ========
Current year
medical claims
paid as a percent
of current year
net incurred
medical claims 78.2% 76.9% 87.7% 87.9% 88.0%
Prior year
redundancies
in the current
period as a
percent of prior
year net medical
claims payables
less prior year
redundancies in
the current period 13.3% 4.9% 4.8% 6.8% 14.7%
Prior year
redundancies
in the current
period as a
percent of prior
year net incurred
medical claims -
as reported 1.5% 0.6% 0.6% 0.8% 1.9%(2)
Prior year
redundancies
in the current
period as a
percent of prior
year net incurred
medical claims -
adjusted for
acquisitions 1.5% 0.6% 0.6% 0.8% 1.6%(2)
(1) Negative amounts reported for net incurred medical claims related to
prior years result from claims being settled for amounts less than
originally estimated.
(2) The reported 2006 ratio of prior year redundancies in the current
period to prior year net incurred medical claims is impacted by having
no net incurred medical claims for WellChoice, Inc. ("WC") in 2005, as
WC was acquired on December 31, 2005. The Company has provided an
adjusted ratio in order to demonstrate this impact, which is calculated
assuming WC had been owned for the entire year ended December 31, 2005.
Under this assumption, net incurred medical claims for the year ended
December 31, 2005, would have been an estimated $37,676.0 million,
rather than the reported $32,865.6 million.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
This document contains certain forward-looking information about us that
is intended to be covered by the safe harbor for "forward-looking statements"
provided by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are statements that are not generally historical
facts. Words such as "expect(s)", "feel(s)", "believe(s)", "will", "may",
"anticipate(s)", "intend", "estimate", "project" and similar expressions are
intended to identify forward-looking statements, which generally are not
historical in nature. These statements include, but are not limited to,
financial projections and estimates and their underlying assumptions;
statements regarding plans, objectives and expectations with respect to future
operations, products and services; and statements regarding future
performance. Such statements are subject to certain risks and uncertainties,
many of which are difficult to predict and generally beyond our control, that
could cause actual results to differ materially from those expressed in, or
implied or projected by, the forward-looking information and statements. These
risks and uncertainties include: those discussed and identified in public
filings with the U.S. Securities and Exchange Commission, or SEC, made by us;
increased government participation in or regulation of health benefits,
managed care and PBM operations; trends in health care costs and utilization
rates; our ability to secure sufficient premium rate increases; our ability to
contract with providers consistent with past practice; competitor pricing
below market trends of increasing costs; reduced enrollment, as well as a
negative change in our health care product mix; risks and uncertainties
regarding the Medicare Part C and Medicare Part D Prescription Drug benefits
programs, including those related to CMS sanctions, potential uncollectability
of receivables resulting from processing and/or verifying enrollment
(including facilitated enrollment), inadequacy of underwriting assumptions,
inability to receive and process correct information, uncollectability of
premium from members, increased medical or pharmaceutical costs, and the
underlying seasonality of the business; a downgrade in our financial strength
ratings; litigation and investigations targeted at health benefits companies
and our ability to resolve litigation and investigations within estimates; our
ability to meet expectations regarding repurchases of shares of our common
stock; decreased revenues following the Express Scripts transaction; increased
operating costs, customer loss and business disruption, including, without
limitation, difficulties in maintaining relationships with employees,
customers, clients or suppliers, that may be greater than expected following
the Express Scripts transaction; our ability to consummate or realize the
ultimate expected value of the Express Scripts transaction; the failure to
receive regulatory approvals required for the Express Scripts transaction on
the terms expected or on the anticipated schedule; our ability to meet
expectations regarding the accounting and tax treatments of the Express
Scripts transaction and the value of the Express Scripts transaction
consideration; funding risks with respect to revenue received from
participation in Medicare and Medicaid programs; non-compliance with the
complex regulations imposed on Medicare and Medicaid programs; events that
result in negative publicity for us or the health benefits industry; failure
to effectively maintain and modernize our information systems and e-business
organization and to maintain good relationships with third party vendors for
information system resources; events that may negatively affect our license
with the Blue Cross and Blue Shield Association; possible impairment of the
value of our intangible assets if future results do not adequately support
goodwill and other intangible assets; intense competition to attract and
retain employees; unauthorized disclosure of member sensitive or confidential
information; changes in the economic and market conditions, as well as
regulations, that may negatively affect our investment portfolios and
liquidity needs; possible restrictions in the payment of dividends by our
subsidiaries and increases in required minimum levels of capital and the
potential negative affect from our substantial amount of outstanding
indebtedness; general risks associated with mergers and acquisitions; various
laws and our governing documents may prevent or discourage takeovers and
business combinations; future bio-terrorist activity or other potential public
health epidemics; and general economic downturns. Readers are cautioned not to
place undue reliance on these forward-looking statements that speak only as of
the date hereof. Except to the extent otherwise required by federal securities
law, we do not undertake any obligation to republish revised forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. Readers are also urged to
carefully review and consider the various disclosures in our SEC reports.
SOURCE: WellPoint, Inc.
CONTACT: Investor Relations: Michael Kleinman, +1-317-488-6713, Media:
Kristin Binns, +1-917-697-7802, both of WellPoint, Inc.
Web Site: http://www.wellpoint.com
