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- Fourth quarter 2009 net income was $5.95 per share, including net benefits of $4.79 per
share resulting primarily from a gain on the sale of the NextRx subsidiaries. Fourth
quarter 2009 adjusted net income was $1.16 per share.
- Full year 2009 net income was $9.88 per share, including net benefits of $3.79 per share
resulting primarily from the gain on the sale of the NextRx subsidiaries. Full year 2009
adjusted net income was $6.09 per share.
- Medical membership was 33.7 million at December 31, 2009
- Full year 2009 operating cash flow exceeded $3.0 billion
- Full year 2010 net income is expected to be at least $6.00 per share
WellPoint, Inc. (NYSE: WLP) today announced that fourth quarter 2009 net income was $2.7 billion, or $5.95 per share. The results included net after-tax income of approximately $2.2 billion, or $4.79 per share, resulting from a gain on the sale of the NextRx pharmacy benefit management subsidiaries ("NextRx"), partially offset by costs for restructuring activities and intangible asset impairments. Excluding these items, adjusted net income for the quarter totaled $536.0 million, or $1.16 per share (see page 14).
Net income in the fourth quarter of 2008 was $331.4 million, or $0.65 per share, which included net investment losses of $350.5 million after-tax, or $0.69 per share. Excluding the net investment losses, fourth quarter 2008 adjusted net income was $681.9 million, or $1.34 per share (see page 14).
For the full year of 2009, net income totaled $4.7 billion, or $9.88 per share. The results included net after-tax income of approximately $1.8 billion, or $3.79 per share, resulting from the gain on the sale of NextRx, partially offset by net investment losses and costs for restructuring activities and intangible asset impairments. Excluding these items, full year 2009 adjusted net income was $2.9 billion, or $6.09 per share (see page 14).
Net income for the full year of 2008 was $2.5 billion, or $4.76 per share. The results included net after-tax charges of $377.4 million, or $0.72 per share, resulting from net investment losses and intangible asset impairments, partially offset by the favorable resolution of a tax matter. Excluding these items, adjusted net income was $2.9 billion in 2008, or $5.48 per share (see page 14).
"We performed well during 2009 in a challenging environment. Despite the impact of the recession on our Commercial enrollment levels and medical cost trends, earnings per share increased as we significantly improved results in the Consumer segment, controlled administrative costs and implemented successful capital management initiatives," said Angela F. Braly, president and chief executive officer. "We are off to a good start in 2010, with more than 400,000 net new National Account members effective January 1. Throughout the year, we will be making important investments in our businesses to create the best health care value for our customers and capitalize on opportunities to drive future growth."
"WellPoint is in a strong financial position as of year-end 2009. Our insurance subsidiaries remain well-capitalized and we continue to generate substantial operating cash flow. We intend to utilize our capital to enhance customer and shareholder value," said Wayne S. DeVeydt, executive vice president and chief financial officer. "We continue to maintain a strong and conservative balance sheet, and are comfortable with our outlook for earnings per share of at least $6.00 in 2010."
CONSOLIDATED HIGHLIGHTS
Membership: Medical enrollment was approximately 33.7 million members at December 31, 2009, a decrease of 1.4 million members, or 3.9 percent, from approximately 35.0 million at December 31, 2008. The decline in membership was most significant in the Local Group business, which experienced a 989,000 member reduction during the year, primarily due to lapses and in-group enrollment losses resulting from the recession and rise in unemployment. Enrollment in State Sponsored business declined by 259,000 members, as the Company withdrew from certain programs for which actuarially-sound reimbursement could not be obtained. Membership in the Company's Individual and Senior businesses declined by 141,000 and 89,000, respectively, while enrollment in the National business grew by 101,000 members.
Medical membership declined by 185,000, or 0.5 percent, in the fourth quarter of 2009. The decline occurred almost entirely in the Commercial segment, where the Company experienced net negative in-group change of 180,000 members resulting from workforce reductions among employer-based customers. While membership declined in the quarter, Commercial fully insured enrollment at December 31, 2009, was approximately 100,000 members higher than previously anticipated.
Operating Revenue: Operating revenue was approximately $15.1 billion in the fourth quarter of 2009, a decrease of 2.4 percent from $15.4 billion in the fourth quarter of 2008. The revenue decline primarily resulted from lower fully insured enrollment in 2009, partially offset by premium rate increases.
Benefit Expense Ratio:The benefit expense ratio was 84.8 percent in the fourth quarter of 2009, an increase of 140 basis points from 83.4 percent in the fourth quarter of 2008. The increase was driven primarily by higher medical cost trends in the Local Group business during 2009, due to elevated flu activity and the impact of the recession on business mix shifts, including higher COBRA(1) enrollment. The increase in the Local Group benefit expense ratio was partially offset by operating improvements that resulted in lower benefit expense ratios in the Senior and State Sponsored businesses. The Company recognized an estimated $50 million of higher-than-anticipated favorable reserve releases that were not reestablished during the fourth quarter of 2009.
(1) COBRA is named for the Consolidated Omnibus Budget Reconciliation Act of 1986, which provides unemployed group members with coverage for up to 18 months after losing their job.
Premium and Cost Trends: Trends represent Local Group fully insured business.
For the full year of 2009, underlying medical cost trend was 8.9 percent. Unit cost increases were the primary driver of medical cost trend, however utilization rose during 2009 due to business mix shifts, including increased COBRAmembership, and elevated flu activity.
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 December 31, 2009, was 42.3 days, a decrease of 4.1 days from 46.4 days as of September 30, 2009. Approximately 1.6 days of the reduction related to favorable prior period reserve releases that were not reestablished at December 31, 2009, as well as faster claims payment cycles. The closing of the NextRx transaction resulted in accelerated payments of pharmacy claims and changes in the timing of these payments, reducing DCP by another 1.5 days in the quarter. The remaining decline of 1.0 day resulted primarily from medical benefit seasonality in the Commercial and Individual businesses, which experience higher benefit expense ratios in the fourth quarter.
SG&A Expense Ratio: The SG&A expense ratio was 17.0 percent in the fourth quarter of 2009, an increase of 190 basis points from 15.1 percent in the fourth quarter of 2008. The increase was driven primarily by costs associated with restructuring activities that are projected to drive greater efficiency and effectiveness in future periods. The Company recognized a pre-tax restructuring charge totaling $171.6 million in the fourth quarter of 2009.
Gain on Sale of Business: On December 1, 2009, the Company completed the sale of NextRx to Express Scripts, Inc. The Company received consideration of $4.7 billion and recognized a pre-tax gain on the sale totaling $3.8 billion in the fourth quarter of 2009.
Impairment of Goodwill and Other Intangible Assets: In connection with the Company's UniCare subsidiaries exiting the commercial health insurance markets in Illinois and Texas at year-end 2009 and the December 2009 closing of the NextRx sale, the Company initiated an impairment review of Goodwill associated with its UniCare subsidiaries during the fourth quarter and also updated a previous impairment review of the UniCare trade name. These reviews resulted in a pre-tax impairment charge of $57.0 million in the fourth quarter of 2009 to adjust the carrying values of the Goodwill and intangible assets to their estimated fair values.
Operating Cash Flow:Operating cash flow for the full year 2009, exceeded $3.0 billion, or 1.0 times adjusted net income. Operating cash flow for full year 2008 totaled $2.5 billion, or approximately 0.9 times adjusted net income.
Share Repurchase Program: During the fourth quarter of 2009, the Company repurchased 16.5 million shares of its common stock for $827.0 million. For the full year of 2009, the Company repurchased 57.3 million shares of its common stock for $2.6 billion. As of December 31, 2009, the Company's remaining Board-approved share repurchase authorization totaled $383.8 million. On January 26, 2010, the Board of Directors increased the share repurchase authorization by $3.5 billion, and the Company will continue to evaluate future share repurchase activity subject to market and industry conditions.
Investment Portfolio & Capital Position: During the fourth quarter of 2009, the Company recorded net investment losses of $4.5 million pre-tax, consisting of other-than-temporary impairments totaling $40.5 million, primarily offset by net realized gains from the sales of securities totaling $36.0 million. As of December 31, 2009, the Company's net unrealized gain position was $711.9 million, consisting of net unrealized gains on fixed maturity and equity securities totaling $501.2 million and $210.7 million, respectively.
As of December 31, 2009, statutory capital levels in the Company's insurance subsidiaries exceeded state regulatory levels by approximately $5.5 billion and Blue Cross and Blue Shield Association requirements by approximately $2.5 billion. Cash and investments at the parent company totaled $4.5 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 NextRx through its December 1, 2009, sale), 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 December 31
------------------------------
2009 2008 Change
---- ---- ------
Operating Revenue
Commercial Business $9,345.1 $9,506.9 (1.7%)
Consumer Business 3,926.1 4,100.6 (4.3%)
Other Business:
External Customers 1,785.9 1,818.7 (1.8%)
Intersegment Revenue 562.2 674.8 (16.7%)
Intersegment Eliminations (562.2) (674.8) 16.7%
------ ------
Other 1,785.9 1,818.7 (1.8%)
------- -------
Total Operating Revenue 15,057.1 15,426.2 (2.4%)
Operating Gain
Commercial Business $316.8 $728.4 (56.5%)
Consumer Business 158.9 235.9 (32.6%)
Other 100.8 87.1 15.7%
Operating Margin
Commercial Business 3.4% 7.7% (430) bp
Consumer Business 4.0% 5.8% (180) bp
(In millions) Year Ended December 31
----------------------
2009 2008 Change
---- ---- ------
Operating Revenue
Commercial Business $37,363.4 $38,009.3 (1.7%)
Consumer Business 16,141.8 16,437.3 (1.8%)
Other Business:
External Customers 7,323.4 7,132.6 2.7%
Intersegment Revenue 2,836.6 2,572.8 10.3%
Intersegment Eliminations (2,836.6) (2,572.8) (10.3%)
-------- --------
Other 7,323.4 7,132.6 2.7%
------- -------
Total Operating Revenue 60,828.6 61,579.2 (1.2%)
Operating Gain
Commercial Business $2,430.3 $3,392.7 (28.4%)
Consumer Business 1,279.7 585.1 118.7%
Other 469.4 370.0 26.9%
Operating Margin
Commercial Business 6.5% 8.9% (240) bp
Consumer Business 7.9% 3.6% 430 bp
Commercial Business: Operating gain for the Commercial Business segment was $316.8 million in the fourth quarter of 2009, a decrease of 56.5 percent compared with $728.4 million in the fourth quarter of 2008. Fourth quarter 2009 results included costs of $127.0 million for the Company's restructuring activities. The remaining decline in operating gain resulted from an increase in the benefit expense ratio for Local Group business and lower fully insured enrollment in 2009. Commercial enrollment declined by 948,000, or 3.3 percent, during 2009, reflecting the rise in unemployment. The Local Group benefit expense ratio increased due to business mix changes, including higher COBRA membership, and elevated flu activity. The Company recognized an estimated $17.0 million of higher-than-anticipated favorable reserve releases that were not reestablished for the Commercial business during the fourth quarter of 2009. The Company continues to refine its product offerings, expand membership retention programs, drive cost of care initiatives and implement pricing actions to favorably impact its Local Group business.
Consumer Business: Operating gain for the Consumer Business segment was $158.9 million in the fourth quarter of 2009, a decrease of 32.6 percent compared with $235.9 million in the fourth quarter of 2008. Lower results in the Individual business and costs of $23.6 million for restructuring activities offset continued operating improvements in the Company's Senior and State Sponsored programs. The Company recognized an estimated $33.0 million of higher-than-anticipated favorable reserve releases that were not reestablished in the Consumer segment during the fourth quarter of 2009.
OUTLOOK
Full Year 2010:
- Net income is expected to be at least $6.00 per share.
- The Company plans to provide additional details about its 2010 outlook at its Investor Day scheduled for February 23, 2010.
Basis of Presentation
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.
Operating margin is defined as operating gain divided by operating revenue.
Certain prior period amounts have been reclassified to conform to the current period presentation.
Conference Call and Webcast
Management will host a conference call and webcast today at 8:30 a.m. Eastern Standard Time ("EST") to discuss its fourth 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)
320-365-3844 (International
651-291-5254 (International) Replay)
An access code is not required for today's conference call. The access code for the replay is 123543. The replay will be available from 1:45 p.m. EST today until the end of the day on February 10, 2010. The call will also be available through a live webcast at http://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 service 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 http://www.wellpoint.com/.
WellPoint, Inc.
Membership & Prescription Volume Summary
(Unaudited and in Thousands)
December 31, December 31, September 30,
Medical Membership 2009 2008 2009
------------------ ---- ---- ----
Customer Type
Local Group 15,643 16,632 15,717
National Accounts 6,813 6,720 6,857
BlueCard 4,744 4,736 4,779
----- ----- -----
Total National 11,557 11,456 11,636
Individual 2,131 2,272 2,173
Senior 1,215 1,304 1,225
State Sponsored 1,733 1,992 1,717
FEP 1,391 1,393 1,387
----- ----- -----
Total Medical Membership 33,670 35,049 33,855
====== ====== ======
Funding Arrangement
Self-Funded 18,236 18,520 18,316
Fully-Insured 15,434 16,529 15,539
------ ------ ------
Total Medical Membership 33,670 35,049 33,855
====== ====== ======
Reportable Segment
Commercial 27,356 28,304 27,530
Consumer 4,923 5,352 4,938
Other 1,391 1,393 1,387
----- ----- -----
Total Medical Membership 33,670 35,049 33,855
====== ====== ======
Other Membership
----------------
Behavioral Health Membership 22,965 23,568 22,883
Life and Disability
Membership 5,393 5,477 5,425
Dental Membership (1) 4,284 4,560 4,322
Managed Dental Membership (1) 3,949 - 3,953
Vision Membership 3,088 2,614 3,037
Medicare Part D Membership 1,509 1,870 1,633
PBM Prescription Volume Paid
(Quarterly)
--------------------------------
Retail Scripts 40,300 60,858 58,753
Mail Order Scripts 4,291 6,485 6,593
Specialty Pharmacy Scripts 138 199 200
--- --- ---
Total Scripts 44,729 67,542 65,546
====== ====== ======
Change from
-----------
December 31, September 30,
Medical Membership 2008 2009
------------------ ---- ----
Customer Type
Local Group (5.9%) (0.5%)
National Accounts 1.4% (0.6%)
BlueCard 0.2% (0.7%)
Total National 0.9% (0.7%)
Individual (6.2%) (1.9%)
Senior (6.8%) (0.8%)
State Sponsored (13.0%) 0.9%
FEP (0.1%) 0.3%
Total Medical Membership (3.9%) (0.5%)
Funding Arrangement
Self-Funded (1.5%) (0.4%)
Fully-Insured (6.6%) (0.7%)
Total Medical Membership (3.9%) (0.5%)
Reportable Segment
Commercial (3.3%) (0.6%)
Consumer (8.0%) (0.3%)
Other (0.1%) 0.3%
Total Medical Membership (3.9%) (0.5%)
Other Membership
----------------
Behavioral Health Membership (2.6%) 0.4%
Life and Disability
Membership (1.5%) (0.6%)
Dental Membership (1) (6.1%) (0.9%)
Managed Dental Membership (1) - (0.1%)
Vision Membership 18.1% 1.7%
Medicare Part D Membership (19.3%) (7.6%)
PBM Prescription Volume Paid
(Quarterly)
--------------------------------
Retail Scripts (33.8%) (31.4%)
Mail Order Scripts (33.8%) (34.9%)
Specialty Pharmacy Scripts (30.7%) (31.0%)
Total Scripts (33.8%) (31.8%)
Dental Membership and Managed Dental Membership as of December 31,
2009, and September 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) December 31
-----------
2009 2008 Change
---- ---- ------
Revenues
Premiums $13,984.8 $14,291.0 (2.1%)
Administrative fees 952.9 975.4 (2.3%)
Other revenue 119.4 159.8 (25.3%)
----- -----
Total operating revenue 15,057.1 15,426.2 (2.4%)
Net investment income 201.6 186.6 8.0%
Gain on sale of business 3,792.3 - NM(1)
Net realized gains (losses) on
investments 36.0 (97.6) NM(1)
Other-than-temporary
impairment losses on
investments:
Total other-than-temporary
impairment losses on
investments (56.5) (445.6) 87.3%
Portion of other-than-
temporary impairment losses
recognized in
other comprehensive income 16.0 - NM(1)
---- ---
Net other-than-temporary
impairment losses recognized in
income (40.5) (445.6) 90.9%
----- ------
Total revenues 19,046.5 15,069.6 26.4%
Expenses
Benefit expense 11,854.4 11,924.7 (0.6%)
Selling, general and
administrative expense
Selling expense 411.7 440.8 (6.6%)
General and administrative
expense 2,141.9 1,892.3 13.2%
------- -------
Total selling, general and
administrative expense 2,553.6 2,333.1 9.5%
Cost of drugs 72.6 117.0 (37.9%)
Interest expense 103.7 115.9 (10.5%)
Amortization of other intangible
assets 65.5 71.1 (7.9%)
Impairment of goodwill and other
intangible assets 57.0 - NM(1)
---- ---
Total expenses 14,706.8 14,561.8 1.0%
Income before income taxes 4,339.7 507.8 754.6%
Income tax expense 1,597.9 176.4 805.8%
------- -----
Net income $2,741.8 $331.4 727.3%
======== ======
Net income per diluted share $5.95 $0.65 815.4%
===== =====
Diluted shares 461.1 508.5 (9.3%)
Benefit expense as a percentage
of premiums 84.8% 83.4% 140 bp
Selling, general and
administrative expense as a
percentage of total operating
revenue 17.0% 15.1% 190 bp
Income before income tax expense
as a percentage of total bp
revenues 22.8% 3.4% 1,940
(1) "NM" = not meaningful
WellPoint, Inc.
Consolidated Statements of Income
Year Ended
(In millions, except per
share data) December 31
-----------
2009 2008 Change
---- ---- ------
(Unaudited)
Revenues
Premiums $56,382.0 $57,101.0 (1.3%)
Administrative fees 3,840.3 3,836.6 0.1%
Other revenue 606.3 641.6 (5.5%)
----- -----
Total operating revenue 60,828.6 61,579.2 (1.2%)
Net investment income 801.0 851.1 (5.9%)
Gain on sale of business 3,792.3 - NM(1)
Net realized gains on
investments 56.4 28.7 96.5%
Other-than-temporary
impairment losses on
investments:
Total other-than-temporary
impairment losses on
investments (538.4) (1,207.9) 55.4%
Portion of other-than-
temporary impairment losses
recognized in
other comprehensive income 88.2 - NM(1)
---- ---
Net other-than-temporary
impairment losses recognized
in income (450.2) (1,207.9) 62.7%
------ --------
Total revenues 65,028.1 61,251.1 6.2%
Expenses
Benefit expense 46,571.1 47,742.4 (2.5%)
Selling, general and
administrative expense
Selling expense 1,685.5 1,778.4 (5.2%)
General and administrative
expense 7,973.6 7,242.1 10.1%
------- -------
Total selling, general and
administrative expense 9,659.1 9,020.5 7.1%
Cost of drugs 419.0 468.5 (10.6%)
Interest expense 447.4 469.8 (4.8%)
Amortization of other
intangible assets 266.0 286.1 (7.0%)
Impairment of goodwill and
other intangible assets 262.5 141.4 85.6%
----- -----
Total expenses 57,625.1 58,128.7 (0.9%)
Income before income taxes 7,403.0 3,122.4 137.1%
Income tax expense 2,657.1 631.7 320.6%
------- -----
Net income $4,745.9 $2,490.7 90.5%
======== ========
Net income per diluted share $9.88 $4.76 107.6%
===== =====
Diluted shares 480.5 523.0 (8.1%)
Benefit expense as a
percentage of premiums 82.6% 83.6% (100) bp
Selling, general and
administrative expense as a
percentage of total operating
revenue 15.9% 14.6% 130 bp
Income before income tax
expense as a percentage of
total revenues 11.4% 5.1% 630 bp
(1) "NM" = not meaningful
WellPoint, Inc.
Consolidated Balance Sheets
December 31, December 31,
(In millions) 2009 2008
------------- -------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $4,816.1 $2,183.9
Investments available-for-sale, at fair
value:
Fixed maturity securities 15,696.9 1,564.8
Equity securities 1,010.7 1,088.0
Other invested assets, current 26.5 23.6
Accrued investment income 172.8 172.8
Premium and self-funded receivables 3,281.0 3,042.9
Other receivables 879.5 1,373.9
Income taxes receivable - 159.9
Securities lending collateral 394.8 529.0
Deferred tax assets, net 523.8 779.0
Other current assets 1,268.6 1,212.2
------- -------
Total current assets 28,070.7 12,130.0
Long-term investments available-for-sale,
at fair value:
Fixed maturity securities 230.4 11,808.4
Equity securities 32.5 30.7
Other invested assets, long-term 775.3 703.2
Property and equipment, net 1,099.6 1,054.5
Goodwill 13,264.6 13,461.3
Other intangible assets 8,259.3 8,827.2
Other noncurrent assets 393.0 387.9
----- -----
Total assets $52,125.4 $48,403.2
========= =========
Liabilities and shareholders' equity
Liabilities
Current liabilities:
Policy liabilities:
Medical claims payable $5,450.5 $6,184.7
Reserves for future policy benefits 62.6 64.5
Other policyholder liabilities 1,617.6 1,626.8
------- -------
Total policy liabilities 7,130.7 7,876.0
Unearned income 1,050.0 1,087.7
Accounts payable and accrued expenses 2,994.1 2,856.5
Income taxes payable 1,228.7 -
Security trades pending payable 37.6 5.8
Securities lending payable 396.6 529.0
Short-term borrowings - 98.0
Current portion of long-term debt 60.8 909.7
Other current liabilities 1,775.2 1,657.6
------- -------
Total current liabilities 14,673.7 15,020.3
Long-term debt, less current portion 8,338.3 7,833.9
Reserves for future policy benefits,
noncurrent 664.6 664.7
Deferred tax liability, net 2,470.4 2,098.9
Other noncurrent liabilities 1,115.1 1,353.7
------- -------
Total liabilities 27,262.1 26,971.5
Shareholders' equity
Common stock 4.5 5.0
Additional paid-in capital 15,192.2 16,843.0
Retained earnings 9,598.5 5,479.4
Accumulated other comprehensive income
(loss) 68.1 (895.7)
---- ------
Total shareholders' equity 24,863.3 21,431.7
-------- --------
Total liabilities and shareholders' equity $52,125.4 $48,403.2
========= =========
WellPoint, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31
----------------------
(In millions) 2009 2008
---- ----
(Unaudited)
Operating activities
Net income $4,745.9 $2,490.7
Adjustments to reconcile net income
to net cash
provided by operating activities:
Net realized gains on investments (56.4) (28.7)
Gain on sale of business (3,792.3) -
Net other-than-temporary
impairment losses recognized in
income 450.2 1,207.9
Loss on disposal of assets 16.4 7.2
Deferred income taxes 61.3 (481.4)
Amortization, net of accretion 446.4 466.3
Depreciation expense 107.1 105.4
Impairment of goodwill and other
intangible assets 262.5 141.4
Share-based compensation 153.6 156.0
Excess tax benefits from share-
based compensation (9.6) (16.0)
Changes in operating assets and
liabilities, net of
effect of business combinations:
Receivables, net (484.2) (558.7)
Other invested assets (62.5) 103.3
Other assets (119.3) (340.2)
Policy liabilities (748.2) 194.9
Unearned income (27.3) (26.7)
Accounts payable and accrued
expenses 952.8 (106.3)
Other liabilities (248.8) (797.0)
Income taxes 1,391.4 (47.3)
Other, net (0.1) 64.6
---- ----
Net cash provided by operating
activities 3,038.9 2,535.4
Investing activities
Purchases of fixed maturity
securities (7,186.8) (5,691.2)
Proceeds from sales and maturities
of fixed maturity securities 5,648.3 6,864.5
Purchases of equity securities (318.9) (1,327.5)
Proceeds from sales of equity
securities 577.3 1,083.1
Purchases of other invested assets (49.0) (145.0)
Proceeds from sales of other
invested assets 3.5 32.8
Changes in securities lending
collateral 132.4 325.1
Purchases of subsidiaries, net of
cash acquired (66.3) (197.7)
Proceeds from sales of
subsidiaries, net of cash sold 4,672.3 5.0
Purchases of property and equipment (378.4) (345.6)
Proceeds from sales of property and
equipment 0.4 12.7
Other, net (32.0) -
----- ---
Net cash provided by investing
activities 3,002.8 616.2
Financing activities
Net repayment of commercial paper
borrowings (397.0) (900.6)
Net (repayment of) proceeds from
short-term borrowings (98.0) 98.0
Proceeds from long-term borrowings 990.3 525.0
Repayment of long-term borrowings (919.3) (38.7)
Changes in securities lending
payable (132.4) (325.1)
Changes in bank overdrafts (344.1) 44.8
Repurchase and retirement of common
stock (2,638.4) (3,276.2)
Proceeds from exercise of employee
stock options and
employee stock purchase plan 126.5 121.2
Excess tax benefits from share-
based compensation 9.6 16.0
--- ----
Net cash used in financing
activities (3,402.8) (3,735.6)
-------- --------
Effects of foreign currency
exchange rate changes on cash
and cash equivalents (6.7) -
Change in cash and cash equivalents 2,632.2 (584.0)
Cash and cash equivalents at
beginning of year 2,183.9 2,767.9
------- -------
Cash and cash equivalents at end of
year $4,816.1 $2,183.9
======== ========
WellPoint, Inc.
Reconciliation of Medical Claims Payable
(unaudited)
Years Ended December 31
-----------------------
(In millions) 2009 2008 2007
---- ---- ----
Gross medical claims payable, beginning of
period $6,184.7 $5,788.0 $5,290.3
Ceded medical claims payable, beginning of
period (60.3) (60.7) (51.0)
----- ----- -----
Net medical claims payable, beginning of
period 6,124.4 5,727.3 5,239.3
Business combinations and purchase
adjustments 2.8 - 15.2
Net incurred medical claims:
Current year 47,315.1 47,940.9 46,366.2
Prior years (redundancies) (1) (807.2) (263.2) (332.7)
------ ------ ------
Total net incurred medical claims 46,507.9 47,677.7 46,033.5
Net payments attributable to:
Current year medical claims 42,057.0 42,020.7 40,765.7
Prior years medical claims 5,157.5 5,259.9 4,795.0
------- ------- -------
Total net payments 47,214.5 47,280.6 45,560.7
Net medical claims payable, end of period 5,420.6 6,124.4 5,727.3
Ceded medical claims, end of period 29.9 60.3 60.7
---- ---- ----
Gross medical claims payable, end of period $5,450.5 $6,184.7 $5,788.0
======== ======== ========
Current year medical claims paid as a
percent of
current year net incurred medical claims 88.9% 87.7% 87.9%
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 15.2% 4.8% 6.8%
Prior year redundancies in the current
period as a
percent of prior year net incurred medical
claims 1.7% 0.6% 0.8%
(1 Negative amounts reported for net incurred medical claims related
to prior years result from claims being settled for amounts less
than originally estimated.)
WellPoint, Inc.
GAAP Reconciliation
(Unaudited)
WellPoint, Inc. has referenced "Adjusted Net Income" and "Adjusted
Net Income Per Share," non-GAAP financial measures, in this
document. These non-GAAP financial measures are not intended to be
alternatives to any measure calculated in accordance with GAAP.
Rather, these non-GAAP financial measures are intended to aid
investors when comparing WellPoint, Inc.'s financial results among
periods. A reconciliation of these measures to the most directly
comparable measures calculated in accordance with GAAP is presented
below.
Three Months Ended
December 31, 2009 December 31, 2008
After- Per After- Per Per
tax, Diluted tax, Diluted Share
in in
millions Share millions Share Change
-------- ----- -------- ----- ------
Net income $2,741.8 $5.95 $331.4 $0.65 815.4%
Add:
Net
investment
losses 2.9 0.01 350.5 0.69
Restructuring
charge
and other
items 102.3 0.21 - -
Impairment
of
goodwill
and other
intangible
assets 50.2 0.11 - -
Subtract:
Gain on
sale of
business (2,361.2) (5.12) - -
-------- ----- --- ---
Net
adjustment
items (2,205.8) (4.79) 350.5 0.69
-------- ----- ----- ----
Adjusted
net
income $536.0 $1.16 $681.9 $1.34 (13.4%)
====== ===== ====== =====
Diluted
shares 461.1 508.5
Year Ended
----------
December 31, 2009 December 31, 2008
After- Per After- Per Per
tax, Diluted tax, Diluted Share
in in
millions Share millions Share Change
--------- ----- --------- ----- ------
Net income $4,745.9 $9.88 $2,490.7 $4.76 107.6%
Add:
Net investment
losses 255.2 0.53 759.6 1.45
Restructuring
charge and
other items 102.3 0.21 - -
Impairment of
goodwill and
other
intangible
assets 184.6 0.38 90.8 0.17
Subtract:
Gain on sale of
business (2,361.2) (4.91) - -
Income tax
benefits from
the favorable
resolution of
certain federal
and state tax
matters - - (473.0) (0.90)
--- --- ------ -----
Net adjustment
items (1,819.1) (3.79) 377.4 0.72
-------- ----- ----- ----
Adjusted net
income $2,926.8 $6.09 $2,868.1 $5.48 11.1%
======== ===== ======== =====
Diluted shares 480.5 523.0
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 our public filings with the SEC; increased government participation in, or regulation or taxation of health benefits and managed care 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 Medicare and Medicaid programs, including those related to non-compliance with the complex regulations imposed thereon, funding risks with respect to revenue received from participation therein and CMS sanctions; 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, increased operating costs and potential customer and supplier losses and business disruptions that may be greater than expected following the close of the Express Scripts transaction; 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; possible restrictions in the payment of dividends by our subsidiaries and increases in required minimum levels of capital and the potential negative effect 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.