Bethesda, MD -(BUSINESS WIRE)- Coventry Health Care, Inc. (NYSE: CVH) today reported consolidated operating results for the quarter ended March 31, 2012. Operating revenues totaled $3.7 billion for the quarter with net earnings of $170.7 million, or earnings per diluted share (EPS) of $1.20. These results include EPS of $0.58 related to the release of Medicare Advantage Risk Adjustment Data Validation (RADV) audit reserves as a result of recent Centers for Medicare & Medicaid Services (CMS) audit methodology changes. Excluding the impact of the RADV prior period reserve release, earnings for the quarter were $88.3 million, or $0.62 EPS.
“Today we reported a strong start to 2012 with six of our seven core businesses performing either at or above our expectations in the quarter,” said Allen F. Wise, chairman and chief executive officer of Coventry. “For example, I am very pleased with the Medicare growth and financial performance in the quarter, now representing approximately $4.3 billion of annual revenue, or 30% of the Company’s total revenue. We are optimistic about the future and our positioning to seize opportunities across our diversified businesses.”
First Quarter 2012 Consolidated Highlights
- Operating revenue of $3.7 billion, an increase of 21% from the prior year quarter
- Total membership of 5,262,000, an increase of 497,000 members from the prior quarter, driven by growth across the Company’s government programs in Medicare Advantage, Medicare Part D, and Medicaid
- Awarded contract with the State of Nebraska to provide services to the State’s expanded Medicaid managed care program which is expected to commence in the third quarter of 2012
- Awarded renewal contract with the State of Missouri Medicaid program effective July 1, 2012
- Received Letters of Intent to contract with the Commonwealth of Pennsylvania HealthChoices Medicaid program in the New West and New East zones with expected effective dates of September 1, 2012, and March 1, 2013, respectively
- Selling, general, and administrative expense (SG&A) of 13.6% of total revenue, a decline of 280 basis points from the prior year quarter
- Capital Deployment
- Initiated the first quarterly cash dividend in the Company’s history at $0.125 per common share
- Closed the Children’s Mercy’s Family Health Partners acquisition effective January 1, 2012
- Retired $233.9 million of senior notes which came due in January 2012
- Approximately $900 million of deployable free cash at the parent at quarter-end
Selected First Quarter 2012 Highlights
Commercial Risk. As of March 31, 2012, commercial risk membership was 1,549,000, a decrease of 87,000 members, or 5%, from the prior year quarter which was partially driven by large employer groups converting to self-funded. The commercial risk medical loss ratio (MLR) was 79.9% in the quarter, a decrease of 10 basis points (bps) from the prior year quarter.
Medicare Advantage. As of March 31, 2012, Medicare Advantage Coordinated Care Plan (MA-CCP) membership was 250,000, an increase of 31,000 members, or 14%, from the prior year quarter, driven by successful execution during the 2012 Annual Enrollment Period. The MA-CCP MLR was 74.1% in the quarter, a decrease of 1,010 bps from the prior year quarter driven by the impact of the RADV prior period reserve release coupled with strong underlying performance.
Medicare Part D. As of March 31, 2012, Medicare Part D membership was 1,458,000, an increase of 299,000 members, or 26%, from the prior year quarter, driven by the introduction of a third product, an increase in auto assignment regions, and successful execution during the 2012 Annual Enrollment Period. The Medicare Part D MLR was 94.9% in the quarter, a decrease of 90 bps from the prior year quarter.
Medicaid. As of March 31, 2012, Medicaid membership was 924,000, an increase of 456,000 members, or 97%, from the prior year quarter. The increase was largely driven by 234,000 members from the Commonwealth of Kentucky Medicaid contract, which was effective November 1, 2011, and 208,000 members from the acquisition of Children’s Mercy’s Family Health Partners, which closed effective January 1, 2012. The Medicaid MLR was 100.0% in the quarter driven primarily by greater than anticipated expenses in the Company’s Kentucky Medicaid business which produced an MLR of 120.9%.
2012 Full Year Guidance
- Risk revenue of $12.875 billion to $13.050 billion
- Management services revenue of $1.145 billion to $1.180 billion
- Consolidated revenue of $14.020 billion to $14.230 billion
- Consolidated MLR of 83.6% to 84.4%
- Cost of sales expense of $251.0 million to $257.0 million
- SG&A of $2.090 billion to $2.130 billion
- Depreciation and amortization expense of $138.0 million to $142.0 million
- Other income of $87.0 million to $93.0 million
- Interest expense of $99.0 million to $101.0 million
- Tax rate of 37.7% to 38.3%
- 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 HealthCare First Quarter 2012 Earnings (PDF).