Bethesda, MD -(BusinessWire)- Coventry Health Care, Inc. (NYSE: CVH) recently reported consolidated operating results for the quarter ended June 30, 2012. Operating revenues totaled $3.5 billion for the quarter, with net earnings of $91.7 million or earnings per diluted share (EPS) of $0.65. These results include a one-time $7.7 million, or $0.03 EPS, impairment charge resulting from the write down of intangible assets due to the non-renewal of the Company’s Kansas Medicaid contract effective January 1, 2013.
“Our second quarter results reflect strong performance in our Government Programs businesses including significant improvement in our Medicaid operations and sequential growth in our Medicare products,” said Allen F. Wise, chairman and chief executive officer of Coventry. “We remain on track for our full year consolidated 2012 EPS guidance and, although there remains a great deal of work to be done, I am encouraged by the financial and operational progress that we have made in our Kentucky Medicaid business.”
Second Quarter 2012 Consolidated Highlights
- Total revenues of $3.5 billion, an increase of 16% over the prior year quarter
- Sequential growth of 47,000 members across our Government Programs businesses of Medicare Advantage Coordinated Care Plans (MA-CCP), Medicare Part D, and Medicaid
- Selling, general, and administrative expense (SG&A) of 14.3% of total revenue, a decline of 170 basis points from the prior year quarter
- Approximately $850 million of deployable free cash at the parent at June 30, 2012
- Received $215 million in dividends from regulated subsidiaries during June
- Repurchased 9.3 million shares for $300 million during the second quarter
- Largest quarter of share repurchase activity in the Company’s history
Selected Second Quarter 2012 Highlights
- Commercial Risk. As of June 30, 2012, commercial risk membership was 1,519,000, a decrease of 30,000 members, or 2%, from the first quarter 2012. The commercial risk medical loss ratio (MLR) was 83.0% in the quarter and 81.5% year-to-date. The Company expects full year 2012 commercial risk MLR to be in the range of 81.5% to 82.5%, a slight increase from the 2011 MLR of 81.6% largely due to the acceleration of broker commission pass through initiatives which mathematically increase the MLR percentage but do not have an adverse impact on operating earnings.
- Medicare Advantage. As of June 30, 2012, MA-CCP membership was 253,000, an increase of 34,000 members, or 16%, from the prior year quarter and an increase of 3,000 members from the first quarter 2012. The MA-CCP MLR was 84.1% in the quarter. Excluding the impact of the Risk Adjustment Data Validation (RADV) audit reserve reduction during the first quarter 2012, the year-to-date MLR of 83.5% is a decrease of 10 basis points from the prior year-to-date period.
- Medicare Part D. As of June 30, 2012, Medicare Part D membership was 1,494,000, an increase of 36,000 members from the first quarter 2012 and an increase of 344,000 members, or 30%, over the prior year quarter. The Medicare Part D MLR was 90.0% in the quarter, an increase of 120 basis points from the prior year quarter, and 92.5% year-to-date, consistent with the prior year-to-date period.
- Medicaid. As of June 30, 2012, Medicaid membership was 932,000, an increase of 465,000 members, or 100%, from the prior year quarter. The Medicaid MLR was 93.3% in the quarter, a decrease of 670 basis points from the first quarter 2012. The Company’s Kentucky Medicaid business produced an MLR of 110.8%, a decrease of 1,010 basis points from the first quarter MLR of 120.9%.
2012 Full Year Guidance
- Risk revenue of $12.900 billion to $13.065 billion
- Management services revenue of $1.165 billion to $1.200 billion
- Consolidated revenue of $14.065 billion to $14.265 billion
- Consolidated MLR of 84.0% to 84.7%
- Cost of sales expense of $257.0 million to $263.0 million
- SG&A of $2.07 billion to $2.11 billion
- Depreciation and amortization expense of $148.0 million to $152.0 million
- Other income of $97.0 million to $101.0 million
- Interest expense of $99.0 million to $101.0 million
- Tax rate of 37.7% to 38.3%
- Diluted share count of 136.0 million to 138.0 million
- EPS of $3.10 to $3.30
The complete earnings release is available here: Coventry Health Care Second Quarter 2012 Earnings (PDF)