Elevance Health(ELV) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Anthem reported Q1 2021 GAAP earnings per share of $6.71 and adjusted earnings per share of$ 7.01, reflecting over 8% year-over-year growth [6][28] - Operating revenue for Q1 2021 was $32.1 billion, a 9% increase year-over-year, or approximately 11% when excluding the impact of the permanent repeal of the health insurer fee [32] - Medical loss ratio for Q1 2021 was 85.6%, an increase of 140 basis points year-over-year, driven by COVID-19 related costs [32][34] - The company ended the quarter with a debt to capital ratio of 41.6%, up from 38.7% at year-end 2020 [36] Business Line Data and Key Metrics Changes - Medical membership totaled 43.5 million members, an increase of 1.4 million lives or 3.3% year-over-year [29] - Medicaid membership growth was robust, aided by the suspension of re-verifications, while Medicare Advantage membership grew by 197,000 lives or 15% year-over-year [11][30] - Commercial enrollment grew sequentially, with strong performance in the risk-based business, although year-over-year membership decreased slightly due to in-group attrition [13][30] Market Data and Key Metrics Changes - Anthem's digital solutions engaged close to 10 million people, with a focus on improving health outcomes and addressing health disparities [15][16] - The launch of the high-performance network in partnership with the Blue Cross and Blue Shield Association is expected to generate average savings of 11% to 20% in certain markets [20][59] Company Strategy and Development Direction - Anthem is focused on leveraging technology to enhance consumer experiences and improve health outcomes, with a commitment to digital-first initiatives [15][19] - The company aims to drive commercial medical cost trends down towards CPI by 2025, emphasizing value-based arrangements with care providers [19] - Anthem's acquisition strategy includes partnerships with companies like MyNEXUS to enhance home-based healthcare management [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver on commitments despite uncertainties related to the pandemic, including potential new COVID variants and pent-up demand for healthcare services [27][41] - The updated guidance reflects a cautious but optimistic outlook, with expectations for adjusted earnings per share to exceed$ 25.10 for the year [40][43] Other Important Information - Anthem's operating cash flow for Q1 was $2.5 billion, indicating strong quality of earnings [39] - The company repurchased 1.4 million shares at a weighted average price of$ 316.06, representing over 25% of its full-year guidance [37] Q&A Session Summary Question: Impact of reserves and membership growth due to Biden administration changes - Management clarified that the $1.5 billion prior period development number is on a gross basis and does not significantly impact the income statement [46] - They expect solid membership growth in individual exchanges but do not foresee significant Medicaid growth from the commercial market at this stage [48][50] Question: Utilization management program and hospital pushback - Management emphasized a focus on value-based care and working with hospital providers to ensure appropriate care settings [53][55] Question: High-performance network and care utilization patterns - The high-performance network launched in January 2021 is expected to generate significant cost savings, with a focus on leveraging provider relationships [58][59] Question: Capital deployment priorities and value-based care initiatives - Anthem plans to allocate approximately 50% of free cash flow for reinvestment, with a focus on partnerships and acquisitions in the value-based care space [63][66] Question: Medicaid business performance and future expectations - Management expressed confidence in Medicaid's performance and expects to end 2021 within target margin ranges, despite some challenges in the Medicare business [79][82]