Coventry’s 2010 earnings report is out, and the news was generally pretty good. Revenues are down considerably, but that’s due to the company’s decision to exit Medicare private Fee for Service; operating earnings are up for the year (from 3.6% of revenues to 5.9% for the year, and 5.4% to 7.8% for the last quarter) and EPS is up nicely as well.
The numbers are a bit misleading, as there were two significant ‘one-time’ events that greatly affected results. According to the press release;
“These results include a favorable impact from the MA-PFFS product of $0.45 EPS and an unfavorable impact from the previously announced Louisiana provider class action litigation of $1.18 EPS [this is from their workers comp network business]. Excluding the impact of MA-PFFS results(1) and the provider class action charge(2), core earnings for the year were $546.4 million, or $3.70 EPS.”
Medical loss ratios (MLR) were down almost across the board, in every product line, with Medicare Part D dropping to 64.7% last quarter. If Coventry’s experiencing the same situation as its much larger competitors, the overall MLR improvement appears to be due in large part to lower utilization.
From a strategy standpoint, I’m going to be listening carefully later today when company execs discuss the future. Two deals in smaller, midwestern markets have been consummated, and I’d expect there will be more as CVTY seeks to gain scale in markets where it can compete – read, avoid markets where the Blues, UHG, Aetna, and Wellpoint dominate. Coventry’s cash position is quite good, with about $850 million in the bank and other liquid assets. I’d expect some of this will be allocated to deals similar to the Wichita transaction.
More on strategy in a post later this week…
Workers comp
Comp revenues appear to be relatively flat. While not split out separately, they can be tracked in the “Other Management Services” line which also includes rental network revenues.
The total line was up less than one percent year over year, reflecting Coventry’s enviable – but limiting – position as the dominant provider of work comp network and related services. According to an informed source, total WC revenues are likely in the $750 million range.
Feb
8
