BETHESDA, Md.–(BUSINESS WIRE)–Coventry Health Care, Inc. (NYSE: CVH) today reported consolidated operating results for the quarter and fiscal year ended December 31, 2011. Operating revenues totaled $3.1 billion for the quarter with net earnings of $85.7 million, or $0.60 earnings per diluted share (EPS). These results include a favorable impact from the Medicare Advantage Private Fee-for-Service (MA-PFFS) product of $0.02 EPS. Excluding the impact of MA-PFFS results(1), core earnings for the quarter were $82.1 million, or $0.58 EPS.
For the year ended December 31, 2011, total operating revenues were $12.2 billion with net earnings of $543.1 million, or $3.70 EPS. These results include EPS of $0.15 from the MA-PFFS product and EPS of $0.68 related to the definitive settlement agreement associated with the provider class action litigation in Louisiana which was approved by the court during the second quarter. Excluding the impact of MA-PFFS results(1) and the provider class action litigation adjustment(2), core earnings for the year were $419.5 million, or $2.87 EPS.
“We spent much of 2011 focused on seizing growth opportunities for 2012 and beyond, and I am very pleased with the strong growth in Medicaid and Medicare as we enter the first quarter of 2012,” said Allen F. Wise, chairman and chief executive officer of Coventry. “As we wrap up 2011, we turn our focus towards 2012 with a forecast of double digit revenue growth coupled with operating earnings and EPS growth. We are hard at work to deliver on 2012 commitments while laying the foundation to seize opportunities for the future.”
Fourth Quarter and Full Year 2011 Consolidated Highlights
- Implemented a Medicaid contract with the Commonwealth of Kentucky effective November 1, 2011
- Providing services to approximately 221,000 new members at year-end
- Closed the acquisition of Children’s Mercy’s Family Health Partners effective January 1, 2012, adding approximately 210,000 Medicaid members
- Successful execution during the 2012 Annual Enrollment Period resulting in enrollment gains of approximately 28,000, or 13%, in Medicare-CCP and just under 300,000, or 25%, in Medicare Part D
- Reduced selling, general, and administrative (SG&A) expense as a percentage of revenue from 16.9% in 2010 to 16.5% in 2011
- Repurchased 3.2 million shares for $100.0 million during the fourth quarter and 10.7 million shares for $327.7 million for the full year
- Increased the share repurchase authorization by 14.4 million shares in the fourth quarter, with authorization remaining at year-end of 16.5 million shares
- Approximately $900 million of deployable free cash at the parent at January 31, 2012
- Entered into a new $750 million, five-year unsecured revolving credit facility during the second quarter of 2011 which remains undrawn at year-end
Selected Fourth Quarter and Full Year 2011 Highlights
Commercial Risk(3). As of December 31, 2011, commercial risk membership was 1,635,000, a decrease of 6,000 members from the prior year-end as approximately 18,000 members associated with the State of Illinois account moved to ASO during 2011. The commercial risk medical loss ratio (MLR) was 83.7% in the quarter and 81.6% for the full year.
Medicare Advantage. As of December 31, 2011, Medicare Advantage Coordinated Care Plan (MA-CCP) membership was 222,000, an increase of 2,000 members from the prior quarter. The MA-CCP MLR was 82.3% in the quarter, a decrease of 180 bps from the prior year quarter, and 82.9% for the full year. During the fourth quarter, the run-out of the MA-PFFS product line contributed $0.02 EPS and has now contributed $0.15 EPS for the full year. As previously announced, the Company did not renew this product line effective January 1, 2010.
Medicare Part D. As of December 31, 2011, Medicare Part D membership was 1,143,000, a decrease of 5,000 members from the prior quarter. The Medicare Part D MLR was 60.5% in the quarter, a decrease of 420 bps from the prior year quarter. The Medicare Part D MLR was 81.7% for the full year, a decrease of 200 bps from the prior full year.
Medicaid. As of December 31, 2011, Medicaid membership was 692,000, an increase of 224,000 members from the prior year-end. Coventry commenced operations in Kentucky during the fourth quarter which contributed approximately 221,000 new members. The Medicaid MLR was 94.4% in the quarter and 89.4% for the full year.
2012 FULL YEAR GUIDANCE
- Risk revenue of $12.75 billion to $12.90 billion
- Management services revenue of $1.11 billion to $1.15 billion
- Consolidated revenue of $13.86 billion to $14.05 billion
- Consolidated MLR of 83.1% to 83.9%
- Cost of sales expense of $231.0 million to $237.0 million
- SG&A expense of $2.13 billion to $2.16 billion
- Depreciation and amortization expense of $136.0 million to $140.0 million
- Other income of $77.0 million to $83.0 million
- Interest expense of $98.0 million to $99.0 million
- Tax rate of 36.7% to 37.3%
- Diluted share count of 138.0 million to 142.0 million
- EPS of $3.10 to $3.30
The complete earnings release is available here: Coventry Health Care Fourth Quarter Earnings (PDF).