WellPoint, Inc. (ticker: WLP, exchange: New York Stock Exchange (.N))
News Release -
23-Jul-2008
WellPoint Reports Second Quarter 2008 ResultsClick here for printer-friendly version
- Net income was $1.44 per share, including $0.03 per share in net
realized investment losses
- Operating revenue reached approximately $15.5 billion, an increase of
3.1 percent from the prior year quarter
- Selling, general and administrative expense ratio declined by 80 basis
points from the prior year quarter
- Full year 2008 net income now expected to be in the range of $5.42 -
$5.57 per share, including net realized investment losses of $0.06 per
share
INDIANAPOLIS, July 23 /PRNewswire-FirstCall/ -- WellPoint, Inc. (NYSE:
WLP) today announced that second quarter 2008 net income was $750.5 million,
or $1.44 per share, which included net realized investment losses of $0.03 per
share. Net income in the second quarter of 2007 was $835.2 million, or $1.35
per share.
"During the second quarter, we continued to execute on our performance
improvement plan and we are seeing positive results from these efforts," said
Angela F. Braly, president and chief executive officer of WellPoint, Inc. "As
of June 30, 2008, claims inventories for fully insured business are down 23
percent from year-end 2007, and our claims-processing speeds have increased.
This provides greater visibility into medical cost trends and enables us to
more accurately price our business. Increased claims-processing speeds also
improve our ability to provide high quality service to our customers and
providers."
"Based on results through the first six months of the year, including
membership mix changes, lower fully insured membership and our settlement of
certain California rescission issues, we have narrowed our 2008 earnings per
share guidance range," added Braly.
"We are the nation's largest health benefits company in terms of
membership, and the local market leader in almost all of the 14 states where
we hold the Blue Cross or Blue Cross and Blue Shield license. As the leader,
we price our products in a disciplined and actuarially sound manner," said
Wayne S. DeVeydt, executive vice president and chief financial officer of
WellPoint, Inc. "While our membership declined in the quarter primarily due
to our withdrawal from the Ohio Covered Families and Children Medicaid
program, we already have several new National Account wins for 2009 and expect
continued membership growth in that business."
CONSOLIDATED HIGHLIGHTS
Membership: Medical enrollment totaled approximately 35.3 million members
at June 30, 2008, an increase of 507,000 members, or 1.5 percent, from 34.8
million at June 30, 2007. The increase was driven by the National business,
which added 626,000 members over the past 12 months. Enrollment in the
Company's Senior products increased by 66,000 members. The growth in National
and Senior membership was partially offset by attrition of 135,000 members in
the Individual and Local Group businesses, and a decline of 54,000 in State
Sponsored programs.
During the second quarter of 2008, medical enrollment declined
sequentially by 99,000 members, or 0.3 percent, due primarily to the Company's
previously announced withdrawal from the Ohio Covered Families and Children
Medicaid program. Local Group and Individual membership declined by 57,000
members driven by disciplined pricing, while National enrollment increased by
45,000.
The Company expects medical enrollment to decline by approximately 150,000
members during the second half of 2008, as projected enrollment declines in
the 205,000 member Connecticut Medicaid program will be partially offset by
growth in the Commercial self-funded businesses.
Operating Revenue: Operating revenue was $15.5 billion in the second
quarter of 2008, an increase of 3.1 percent from $15.0 billion in the second
quarter of 2007. The increase was driven primarily by premium rate increases
in all medical lines of business and growth in the Company's Medicare
Advantage products. These increases in revenue were partially offset by the
loss of the New York State prescription drug contract and lower Commercial and
State Sponsored fully insured membership.
Benefit Expense Ratio: The benefit expense ratio was 83.3 percent in the
second quarter of 2008, an increase of 150 basis points from 81.8 percent in
the prior year quarter. Approximately 90 basis points of the increase
resulted from higher medical costs and membership mix changes in the Local
Group business. Higher medical costs in the Company's Medicare Advantage
products increased the consolidated benefit expense ratio by another 45 basis
points. These increases were partially offset by the loss of the New York
State prescription drug contract, which had a benefit expense ratio higher
than the Company average. The Company continues to adjust pricing and benefit
plan designs to address the higher medical costs in its Local Group and
Medicare Advantage businesses.
The benefit expense ratio declined by 180 basis points from the first
quarter of 2008 primarily due to seasonality in the Senior business, including
the Medicare Part D drug benefit design, and favorable prior period reserve
adjustments.
Premium and Cost Trends: Trends include Local Group and Individual
fully-insured businesses.
For the twelve month period ended June 30, 2008, unit cost increases
continue to be the primary driver of medical cost trends. Medical cost trends
for the full year of 2008 are expected to be in the range of 8.0 percent, plus
or minus 50 basis points, and 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.
SG&A Expense Ratio: The SG&A expense ratio was 14.3 percent in the second
quarter of 2008, a decline of 80 basis points from 15.1 percent in the second
quarter of 2007. The decline primarily resulted from reduced incentive
compensation in the current year quarter.
Operating Cash Flow: Operating cash flow for the six months ended June 30,
2008 was $1.1 billion, or 0.9 times net income. The decrease in operating
cash flow from 2007 was driven primarily by the timing of payments from the
Centers for Medicare and Medicaid Services, increases in receivables due to
membership growth, claims inventory reductions and other actions we have taken
in response to our systems migrations, and lower net income in 2008. The
Company now expects operating cash flow of approximately $3.0 billion for the
full year of 2008.
Days in Claims Payable: Days in Claims Payable ("DCP") as of June 30, 2008
was 47.7 days, a 0.4 day decrease from 48.1 days at March 31, 2008. The
decrease was primarily attributable to a reduction in the length of time
between the date of service and claims payment and changes in the timing of
payments in the company's Pharmacy Benefit Management ("PBM") operation,
partially offset by prior period reserve adjustments.
Share Repurchase Program: During the second quarter of 2008, the Company
repurchased 16.8 million shares of its common stock for $866.6 million. For
the six months ended June 30, 2008, the Company repurchased 46.5 million
shares for approximately $2.9 billion. As of June 30, 2008, the remaining
Board-approved share repurchase authorization was approximately $1.4 billion,
and cash and investments held at the parent company and available for general
corporate use totaled $932.8 million.
REPORTABLE SEGMENTS
In 2008, 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 PBM and Behavioral
Health operations), Federal Employee Plan or "FEP" business, National
Government Services, inter-segment sales and expense eliminations, and
corporate expenses not allocated to the other reportable segments. These
segments are consistent with the Company's organizational structure.
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
2008 2007 Change
Operating Revenue
Commercial Business $9,517.1 $9,533.4 (0.2%)
Consumer Business 4,144.0 3,808.9 8.8%
Other Business:
External Customers 1,815.9 1,671.3 8.7%
Intersegment Revenue 697.5 565.8 23.3%
Intersegment Eliminations (697.5) (565.8) (23.3%)
Other 1,815.9 1,671.3 8.7%
Total Operating Revenue 15,477.0 15,013.6 3.1%
Operating Gain (Loss)
Commercial Business $820.7 $928.8 (11.6%)
Consumer Business 223.7 212.0 5.5%
Other 139.9 93.2 50.1%
Operating Margin
Commercial Business 8.6% 9.7% (110) bp
Consumer Business 5.4% 5.6% (20) bp
(In millions) Six Months Ended June 30
2008 2007 Change
Operating Revenue
Commercial Business $19,005.3 $18,989.0 0.1%
Consumer Business 8,244.0 7,535.3 9.4%
Other Business:
External Customers 3,594.3 3,330.5 7.9%
Intersegment Revenue 1,362.8 1,074.4 26.8%
Intersegment Eliminations (1,362.8) (1,074.4) (26.8%)
Other 3,594.3 3,330.5 7.9%
Total Operating Revenue 30,843.6 29,854.8 3.3%
Operating Gain (Loss)
Commercial Business $1,704.4 $1,843.9 (7.6%)
Consumer Business 99.5 356.0 (72.1%)
Other 263.0 207.4 26.8%
Operating Margin
Commercial Business 9.0% 9.7% (70) bp
Consumer Business 1.2% 4.7% (350) bp
Commercial Business: Operating gain for the Commercial Business segment
was $820.7 million in the second quarter of 2008, a decrease of 11.6 percent
compared with $928.8 million in the second quarter of 2007. The decline
principally resulted from higher medical costs and membership mix changes in
the Local Group business. Membership in the Commercial segment increased by
546,000, or 2.0 percent, from the second quarter of 2007, as growth in
self-funded enrollment was partially offset by a decline in fully insured
membership. The Company is executing on a series of initiatives, including
account retention programs, broker incentive programs and the introduction of
new products, all focused on growing Commercial fully insured enrollment.
Consumer Business: Operating gain for the Consumer Business segment was
$223.7 million in the second quarter of 2008, an increase of 5.5 percent
compared with $212.0 million in the second quarter of 2007. The increase
reflected an improvement in Medicare Supplement and State Sponsored operating
results, partially offset by deterioration in the performance of the Company's
Medicare Advantage business, as benefit designs of certain Medicare Advantage
products have resulted in adverse selection. The Company has implemented
medical management initiatives to address high claims experience in its
Medicare Advantage business and will adjust benefits and pricing for 2009.
Other: Operating gain for the Other segment totaled $139.9 million in the
second quarter of 2008, an increase of 50.1 percent compared with $93.2
million in the prior year quarter. The increase was driven by growth in the
PBM operation, including a 7.5 percent increase in processed prescription
volume. Behavioral Health results also improved from the prior year quarter
as enrollment increased by approximately 3.4 million lives, or 16.8 percent,
driven by the conversion of New York membership to the WellPoint Behavioral
Health Company.
OUTLOOK
Full Year 2008:
- The Company now expects net income to be in the range of $5.42 - $5.57
per share, including net realized investment losses of $0.06 per share.
- Year-end medical enrollment is now expected to be approximately 35.1
million members.
- Operating revenue is now expected to total approximately $61.9 billion.
- The benefit expense ratio is expected to be in the range of 83.3 - 83.6
percent.
- The SG&A expense ratio is now expected to be approximately 14.5
percent.
- The Company now expects operating cash flow of approximately $3.0
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.
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 908943. The replay will be available from 1:45 p.m.
EDT today until the end of the day on August 6, 2008. 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, Inc. is the largest health benefits company in terms of medical
membership in the United States. WellPoint is an independent licensee of the
Blue Cross and Blue Shield Association and serves its 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.), Wisconsin; and through UniCare.
Additional information about WellPoint is available at www.wellpoint.com .
WellPoint, Inc.
Membership & Prescription Volume Summary
(Unaudited and in Thousands)
Change from
June 30, December 31, June 30, December 31, June 30,
Medical Membership 2008 2007 2007 2007 2007
Customer Type
Local Group 16,650 16,663 16,688 (0.1%) (0.2%)
National Accounts 6,732 6,389 6,413 5.4% 5.0%
BlueCard 4,782 4,563 4,475 4.8% 6.9%
Total National 11,514 10,952 10,888 5.1% 5.7%
Individual 2,353 2,390 2,450 (1.5%) (4.0%)
Senior 1,304 1,250 1,238 4.3% 5.3%
State Sponsored 2,068 2,174 2,122 (4.9%) (2.5%)
FEP 1,385 1,380 1,381 0.4% 0.3%
Total Medical
Membership 35,274 34,809 34,767 1.3% 1.5%
Funding Arrangement
Self-Funded 18,499 17,737 17,425 4.3% 6.2%
Fully-Insured 16,775 17,072 17,342 (1.7%) (3.3%)
Total Medical
Membership 35,274 34,809 34,767 1.3% 1.5%
Reportable Segment
Commercial Business 28,414 27,886 27,868 1.9% 2.0%
Consumer Business 5,475 5,543 5,518 (1.2%) (0.8%)
Other Business 1,385 1,380 1,381 0.4% 0.3%
Total Medical
Membership 35,274 34,809 34,767 1.3% 1.5%
Other Membership
Behavioral Health
Membership 23,410 20,230 20,038 15.7% 16.8%
Life and Disability
Membership 5,553 5,598 5,754 (0.8%) (3.5%)
Dental Membership 4,665 5,014 5,169 (7.0%) (9.8%)
Vision Membership 2,574 2,401 2,480 7.2% 3.8%
Medicare Part D
Membership 1,854 1,614 1,594 14.9% 16.3%
PBM Prescription
Volume Processed
(Quarterly) (1)
Retail Scripts 98,296 91,393 90,882 7.6% 8.2%
Mail Order Scripts 6,834 7,019 7,022 (2.6%) (2.7%)
Specialty Pharmacy
Scripts 230 193 150 19.2% 53.3%
Total Scripts 105,360 98,605 98,054 6.9% 7.5%
PBM Prescription
Volume Paid
(Quarterly) (1)
Retail Scripts 59,782 56,833 55,892 5.2% 7.0%
Mail Order Scripts 6,550 7,000 7,011 (6.4%) (6.6%)
Specialty Pharmacy
Scripts 165 131 87 26.0% 89.7%
Total Scripts 66,497 63,964 62,990 4.0% 5.6%
(1) Prescriptions processed represent all requests submitted to our PBM
companies. Prescriptions processed may not ultimately agree to the amount paid
for various reasons, including duplicative and non-covered submissions.
WellPoint, Inc.
Consolidated Statements of Income
(Unaudited)
Three Months Ended
(In millions, except per share data) June 30
2008 2007 Change
Revenues
Premiums $14,344.9 $13,935.9 2.9%
Administrative fees 966.0 923.4 4.6%
Other revenue 166.1 154.3 7.6%
Total operating revenue 15,477.0 15,013.6 3.1%
Net investment income 217.6 253.4 (14.1%)
Net realized gains (losses) on
investments (27.8) 0.9 NM (1)
Total revenues 15,666.8 15,267.9 2.6%
Expenses
Benefit expense 11,955.6 11,405.4 4.8%
Selling, general and administrative
expense
Selling expense 445.1 429.6 3.6%
General and administrative
expense 1,773.5 1,830.7 (3.1%)
Total selling, general and
administrative expense 2,218.6 2,260.3 (1.8%)
Cost of drugs 118.5 113.9 4.0%
Interest expense 116.5 100.1 16.4%
Amortization of other intangible
assets 71.6 70.9 1.0%
Total expenses 14,480.8 13,950.6 3.8%
Income before income tax expense 1,186.0 1,317.3 (10.0%)
Income tax expense 435.5 482.1 (9.7%)
Net income $750.5 $835.2 (10.1%)
Net income per diluted share $1.44 $1.35 6.7%
Diluted shares 522.6 617.9 (15.4%)
Benefit expense as a percentage of
premiums 83.3% 81.8% 150 bp
Selling, general and administrative
expense as a percentage of total
operating revenue 14.3% 15.1% (80) bp
Income before income tax expense as a
percentage of total revenues 7.6% 8.6% (100) bp
(1) "NM" = not meaningful
WellPoint, Inc.
Consolidated Statements of Income
(Unaudited)
Six Months Ended
(In millions, except per share data) June 30
2008 2007 Change
Revenues
Premiums $28,579.3 $27,693.3 3.2%
Administrative fees 1,935.6 1,847.9 4.7%
Other revenue 328.7 313.6 4.8%
Total operating revenue 30,843.6 29,854.8 3.3%
Net investment income 450.3 500.0 (9.9%)
Net realized gains (losses) on
investments (73.4) 1.1 NM (1)
Total revenues 31,220.5 30,355.9 2.8%
Expenses
Benefit expense 24,072.1 22,835.2 5.4%
Selling, general and administrative
expense
Selling expense 889.4 852.6 4.3%
General and administrative
expense 3,577.8 3,539.3 1.1%
Total selling, general and
administrative expense 4,467.2 4,391.9 1.7%
Cost of drugs 237.4 220.4 7.7%
Interest expense 235.5 203.0 16.0%
Amortization of other intangible
assets 143.1 141.7 1.0%
Total expenses 29,155.3 27,792.2 4.9%
Income before income taxes 2,065.2 2,563.7 (19.4%)
Income taxes 726.6 945.4 (23.1%)
Net income $1,338.6 $1,618.3 (17.3%)
Net income per diluted share $2.50 $2.61 (4.2%)
Diluted shares 535.1 620.5 (13.8%)
Benefit expense as a percentage of
premiums 84.2% 82.5% 170 bp
Selling, general and administrative
expense as a percentage of total
operating revenue 14.5% 14.7% (20) bp
Income before income taxes as a
percentage of total revenues 6.6% 8.4% (180) bp
(1) "NM" = not meaningful
WellPoint, Inc.
Consolidated Balance Sheets
June 30, December 31,
(In millions) 2008 2007
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $2,273.8 $2,767.9
Investments available-for-sale, at
fair value 3,541.2 3,726.3
Other invested assets, current 40.7 40.3
Accrued investment income 163.0 165.8
Premium and self-funded receivables 3,203.4 2,870.1
Other receivables 1,274.6 996.4
Income taxes receivable 53.1 0.9
Securities lending collateral 715.4 854.1
Deferred tax assets, net 669.0 559.6
Other current assets 1,106.2 1,050.4
Total current assets 13,040.4 13,031.8
Long-term investments available-for-sale,
at fair value 12,826.5 13,962.4
Other invested assets, long-term 789.9 752.9
Property and equipment, net 1,014.2 995.9
Goodwill 13,539.8 13,435.4
Other intangible assets 9,084.0 9,220.8
Other noncurrent assets 681.1 660.8
Total assets $50,975.9 $52,060.0
Liabilities and shareholders' equity
Liabilities
Current liabilities:
Policy liabilities:
Medical claims payable $6,270.3 $5,788.0
Reserves for future policy benefits 65.3 63.7
Other policyholder liabilities 1,620.2 1,832.2
Total policy liabilities 7,955.8 7,683.9
Unearned income 1,054.6 1,114.6
Accounts payable and accrued expenses 2,834.4 2,909.6
Security trades pending payable 13.8 50.6
Securities lending payable 715.4 854.1
Current portion of long-term debt 19.2 20.4
Other current liabilities 1,965.0 1,755.0
Total current liabilities 14,558.2 14,388.2
Long-term debt, less current portion 9,750.1 9,023.5
Reserves for future policy benefits,
noncurrent 659.0 661.9
Deferred tax liability, net 2,919.6 3,004.4
Other noncurrent liabilities 1,834.5 1,991.6
Total liabilities 29,721.4 29,069.6
Shareholders' equity
Common stock 5.1 5.6
Additional paid-in capital 17,078.8 18,441.1
Retained earnings 4,396.8 4,387.6
Accumulated other comprehensive income (loss) (226.2) 156.1
Total shareholders' equity 21,254.5 22,990.4
Total liabilities and shareholders' equity $50,975.9 $52,060.0
WellPoint, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30
(In millions) 2008 2007
Operating activities
Net income $1,338.6 $1,618.3
Adjustments to reconcile net income to net
cash provided by operating activities:
Net realized losses (gains) on
investments 73.4 (1.1)
Loss on disposal of assets 0.5 1.1
Deferred income taxes 26.0 (228.1)
Amortization, net of accretion 238.2 232.5
Depreciation expense 51.9 63.0
Share-based compensation 89.5 102.1
Excess tax benefits from share-based
compensation (13.6) (127.1)
Changes in operating assets and
liabilities, net of effect of
business combinations:
Receivables, net (612.9) (198.9)
Other invested assets, current (0.3) 10.0
Other assets (94.9) (39.1)
Policy liabilities 269.0 484.8
Unearned income (59.8) 677.8
Accounts payable and accrued
expenses (196.2) (319.9)
Other liabilities 64.2 201.9
Income taxes (35.1) 254.9
Other, net 6.8 (25.2)
Net cash provided by operating activities 1,145.3 2,707.0
Investing activities
Purchases of fixed maturity securities (4,000.4) (5,396.2)
Proceeds from sales and maturities of
fixed maturity securities 4,875.7 4,273.3
Purchase of equity securities (1,049.8) (817.1)
Proceeds from sales of equity securities 792.8 1,232.0
Changes in securities lending collateral 138.7 (80.5)
Purchases of subsidiaries, net of cash
acquired (116.5) -
Proceeds from sales of subsidiaries,
net of cash sold 5.0 -
Purchases of property and equipment (156.0) (120.1)
Proceeds from sales of property and equipment 11.3 7.6
Other, net (43.8) (21.6)
Net cash provided by (used in) investing
activities 457.0 (922.6)
Financing activities
Net (repayment of) proceeds from commercial
paper borrowings 196.2 (296.7)
Proceeds from long-term borrowings 525.0 1,478.3
Repayment of long-term borrowings (5.9) (5.4)
Changes in securities lending payable (138.7) 80.5
Changes in bank overdrafts 104.5 (145.9)
Repurchase and retirement of common stock (2,875.2) (1,957.7)
Proceeds from exercise of employee stock
options and employee stock purchase plan 84.1 538.4
Excess tax benefits from share-based
compensation 13.6 127.1
Net cash used in financing activities (2,096.4) (181.4)
Change in cash and cash equivalents (494.1) 1,603.0
Cash and cash equivalents at beginning of
period 2,767.9 2,602.1
Cash and cash equivalents at end of period $2,273.8 $4,205.1
WellPoint, Inc.
Reconciliation of Medical Claims Payable
Six Months Ended June 30 Year Ended December 31
(In millions) 2008 2007 2007 2006 2005
(Unaudited)
Gross medical claims
payable, beginning
of period $5,788.0 $5,290.3 $5,290.3 $4,853.4 $4,134.0
Ceded medical claims
payable, beginning
of period (60.7) (51.0) (51.0) (27.7) (31.9)
Net medical claims
payable, beginning
of period 5,727.3 5,239.3 5,239.3 4,825.7 4,102.1
Business combinations
and purchase
adjustments - (2.0) 15.2 (6.4) 784.5
Net incurred medical
claims:
Current year 24,308.4 23,208.3 46,366.2 42,613.2 32,865.6
Prior years
(redundancies)
(1) (269.6) (356.1) (332.7) (617.7) (644.9)
Total net incurred
medical claims 24,038.8 22,852.2 46,033.5 41,995.5 32,220.7
Net payments
attributable to:
Current year
medical claims 18,689.5 17,973.0 40,765.7 37,486.0 28,997.1
Prior years
medical claims 4,865.4 4,467.6 4,795.0 4,089.5 3,284.5
Total net payments 23,554.9 22,440.6 45,560.7 41,575.5 32,281.6
Net medical claims
payable, end of
period 6,211.2 5,648.9 5,727.3 5,239.3 4,825.7
Ceded medical claims,
end of period 59.1 54.0 60.7 51.0 27.7
Gross medical claims
payable, end of
period $6,270.3 $5,702.9 $5,788.0 $5,290.3 $4,853.4
Current year medical
claims paid as a
percent of current
year net incurred
medical claims 76.9% 77.4% 87.9% 88.0% 88.2%
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 4.9% 7.3% 6.8% 14.7% 18.7%
Prior year redundancies
in the current period
as a percent of prior
year net incurred
medical claims - as
reported 0.6% 0.8% 0.8% 1.9% 4.2%
Prior year redundancies
in the current period
as a percent of prior
year net incurred
medical claims -
adjusted for
acquisitions 0.6% 0.8% 0.8% 1.6% (2) 2.1% (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 ratios of prior year redundancies in the current period
to prior year net incurred medical claims is impacted by certain acquisitions
(the former WellChoice, Inc. in 2005 and WHN in 2004). The Company has
provided ratios adjusted for these acquisitions in order to demonstrate these
impacts. Refer to the table entitled, "Reconciliation of Medical Claims
Payable - Adjusted Ratios" for details regarding the respective calculation
methodologies.
WellPoint, Inc.
Reconciliation of Medical Claims Payable - Adjusted Ratios
(Unaudited)
Note: Below are reconciliations for the adjusted ratios of prior year
redundancies in the current period to prior year net incurred medical claims
that are included in table entitled, "Reconciliation of Medical Claims
Payable."
Ratio for the Year Ended December 31, 2006
This ratio is impacted by having no net incurred medical claims for the
former WellChoice, Inc. ("WC") in 2005.
Net incurred medical claims related to prior years
(redundancies) - year ended December 31, 2006 (As
Reported) $617.7
Net incurred medical claims - year ended December
31, 2005 (As Reported) $32,865.6
Ratio (As Reported) 1.9%
Net incurred medical claims - year ended December
31, 2005 (Comparable Basis) (1) $37,676.0
Ratio (As Adjusted) 1.6%
(1) Represents comparable benefit expense, assuming WC had been owned for
the entire year ended December 31, 2005.
Ratio for the Year Ended December 31, 2005
This ratio is impacted by having only one month of net incurred medical
claims for the former WellPoint Health Networks Inc. ("WHN") in 2004.
Net incurred medical claims related to prior years
(redundancies) - year ended December 31, 2005 (As
Reported) $644.9
Net incurred medical claims - year ended December
31, 2004 (As Reported) $15,344.9
Ratio (As Reported) 4.2%
Net incurred medical claims - year ended December
31, 2004 (Comparable Basis) (2) $30,819.1
Ratio (As Adjusted) 2.1%
(2) Represents comparable benefit expense, assuming WHN had been owned for
the entire year ended December 31, 2004.
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 U.S. Securities and Exchange Commission, or SEC; increased
government 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 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; 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 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, applicable to our investment portfolios; 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, or
Media: Shannon Troughton, +1-317-488-6789, both of WellPoint, Inc.
Web site: http://www.wellpoint.com |
WellPoint, Inc.
