As Coventry prepares to become part of Aetna, Coventry’s earnings report marks the last quarterly report we’ll see from Allen Wise and Co.  As par usual, I’ll split my review into two parts; workers comp (of most interest to many readers) and the rest of their business in a future post.  There’s no earnings call scheduled, so no Q&A with investors or presentation from management to mull over…

First, overall it was a strong quarter for Coventry with revenues up 10% driven by big growth in public-sector programs; commercial membership declined slightly. Quarterly profits also rose, altho annual profits were down about 4 percent.

Today, it’s work comp.

As far as revenues a tough quarter for the work comp division, actually a tough series of quarters.  Revenues dropped each quarter, albeit slightly.  However, the total decline was over $14 million over the four quarters, and the year saw a drop of $26 million or 3.3 percent from the prior year.

There were several business losses over the last year that undoubtedly contributed to the drop in revenues.  ESIS switched PBMs from Coventry’s FirstScript to Progressive, and moved other services from Coventry as well.  The PBM move probably had the largest impact on the WC Division’s financials, as the entire pharmacy spend counts as top line for CVTY thus losing tens of millions of pharmacy has a big impact on reported revenues.  The loss may have been a wake-up call to management, as there have been some indications that FirstScript is working to elevate its game.  However, it has a ways to go to catch up to the offerings of its competitors, almost all of which have a pretty significant head start.

While that was a significant loss, it was likely a good deal smaller than one that has yet to be felt; the US Postal Service moved their PBM business from FS to PMSI.  The deal was done late last fall and it should hit the financials sometime early this year.

To the credit of the WC Division and boss David Young, they were able to add enough incremental revenue thru price increases and smaller account wins to mitigate a good chunk of the loss of the ESIS business  and other losses.

So, where does that leave Coventry work comp?

A recent re-shuffle will put the division under former-CFO-now-head-of-National-Business Joe Zubretsky. Interestingly, former Coventry CFO Shawn Guertin is now working for Aetna in a top finance slot.  Guertin’s experience with the WC business will likely be the subject of a discussion or two between these two gentlemen…

Zubretsky’s most recent public comments about work comp have been pretty positive.  I fully expect Aetna to embrace the business; it has less regulatory risk than their core business, zero insurance risk, and may have some strategic benefit as Aetna looks to the future of disability management. And let’s not forget the strong positive cash flow generated by the division, cash that will be sorely needed by mother Aetna as they continue to prepare for 2014.

Net is we can expect Coventry’s comp division to flourish under Aetna; there may be some changes but I’d expect them to be positive, and we may even see investment in the unit.  

The lack of effective, or even decent, marketing in the work comp services and insurance industry is all but universal.  It is also damaging – to the industry as well as to individual companies.  And it is dumb.

The value of a brand is well-documented;

• A study by Interbrand indicates one-third of shareholder value can be attributed to the company’s brand.
• Ford has been dumping hard assets in favor of brand names – Jaguar, for instance – and has seen an appreciable rise in the company’s market share and value.

A brand is build by marketing – which is NOT communications or proposal writing or trade shows or parties at trade shows or trinkets given to adjusters.

Marketing – BIG M MARKETING – is all of those and more.  It starts with defining the value you bring to a specific segment.  It requires a simple and clear statement of that value so that potential buyers understand how it relates to them, and that must resonate.  And it continues from there.

But the purpose of this post is not to provide a primer on marketing or branding, but rather to call attention to the dearth of effective marketing.  My sense is this happens because most leaders just don’t get marketing – they think it is soft, fluff, a waste, a nice-to-have, when in reality it is a have-to-have.  Companies have to stand for something, mean something, and that “something” isn’t what the leader THINKS it is, it is what the market thinks it is.

How do you know if you have effective marketing?  Obviously, or perhaps for some less than obviously, market research.  What do users/buyers/influencers think of your company ?  How do you know?  No, how do you REALLY know?

Objective and well-designed market research.

Allow me to close with an example of what effective marketing can do.

I give you Joe Paduda. (forgive the use of the third-person)

A consultant in the industry, known by a few folks eight years ago, mostly former co-workers and colleagues, Paduda is now quite well-known throughout the industry. He has keynoted the two largest conferences, is a sought-after speaker and expert, almost four thousand people subscribe to his blog, and many seek to curry favor with him, or avoid pissing him off.  His client list is extensive, he does not work cheap, and he regularly turns down projects.

The “Paduda brand” drives success.  Smart, insightful, opinionated, honest, fair, objective with deep understanding of the industry and strong strategic sense.  A tendency to be bleeding-edge (not politically, altho some would disagree, but rather too far in front of trends) and occasionally, and pretty publicly, wrong.

Marketing – via the blog (thank you Julie Ferguson!) and public relations (thank you Helen Knight!) is the driver of my success.

If I can do it, so can you.  All it requires is consistent commitment, a willingness to spend money, and a relentless focus on building and strengthening your brand.

What does this mean for you?

Success – or lack thereof.