Coventry first quarter revenues increase 6.6% to $3.0 billion

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Apr 30 2011

Coventry Health Care, Inc. (NYSE: CVH) today reported consolidated operating results for the quarter ended March 31, 2011. Operating revenues totaled $3.0 billion for the quarter with net earnings of $110.2 million, or earnings per diluted share (EPS) of $0.74. These results include EPS of $0.08 from the Medicare Advantage Private Fee-for-Service (MA-PFFS) product.

"We are pleased to report a strong start to the year with performance across all seven of our core businesses meeting or exceeding our expectations," said Allen F. Wise, chairman and chief executive officer of Coventry. "In addition, today we are increasing our 2011 EPS guidance driven by an improved revenue outlook coupled with SG&A leverage."

First Quarter 2011 Consolidated Highlights

Revenues up 6.6% from the prior year quarter
EPS up 12.1% from the prior year quarter
Commercial risk membership of 1,636,000, an increase of 135,000 members from the prior year quarter
Approximately $750 million of deployable free cash at the parent at quarter-end
- $150.5 million payment into escrow for potential litigation settlement⁽¹⁾ made in February
Repurchased 1.7 million shares for $50.2 million during the quarter
- Increased share repurchase authorization by 7.5 million shares
- Total remaining share repurchase authorization of 11.0 million shares at quarter-end

Selected First Quarter 2011 Highlights

Health Plan Commercial Risk. As of March 31, 2011, health plan commercial risk membership was 1,636,000, an increase of 135,000 members from the prior year quarter. The health plan commercial group risk medical loss ratio (MLR) of 80.2% in the quarter was unchanged from the MLR reported in the prior year quarter.
Medicare Advantage. As of March 31, 2011, Medicare Advantage Coordinated Care Plan (MA-CCP) membership was 219,000, an increase of 29,000 members from the prior year quarter, largely driven by the acquisition of Mercy Health Plans which closed on October 1, 2010. The MA-CCP MLR was 84.2% in the quarter, a decrease of 150 basis points (bps) from the prior year quarter. During the first quarter, the MA-PFFS product line contributed $0.08 EPS. As previously announced, the Company did not renew this product line effective January 1, 2010.
Medicare Part D. As of March 31, 2011, Medicare Part D membership was 1,159,000, a decrease of 441,000 members from the prior year quarter. The Medicare Part D MLR was 95.8% in the quarter, an increase of 50 bps from the prior year quarter.
Medicaid. As of March 31, 2011, Medicaid membership was 468,000, an increase of 62,000 members from the prior year quarter, largely driven by entry into new markets in Nebraska and Pennsylvania during 2010. The Medicaid MLR was 86.0% in the quarter, an increase of 200 bps from the prior year quarter.

2011 FULL YEAR GUIDANCE

Risk revenue of $10.50 billion to $10.90 billion
Management services revenue of $1.175 billion to $1.195 billion
Consolidated revenue of $11.675 billion to $12.095 billion
Consolidated MLR of 81.9% to 82.5%
Cost of sales expense of $264.0 million to $271.0 million
Selling, general, and administrative expense (SG&A) of $2.00 billion to $2.04 billion
Depreciation and amortization expense of $136.0 million to $140.0 million
Other income of $74.0 million to $78.0 million
Interest expense of $95.0 million to $102.0 million
- Includes projected interest expense that would result from any refinancing activities that the Company may pursue in advance of 2012 debt maturities
Tax rate of 36.0% to 37.0%
Diluted share count of 147.0 million to 149.0 million
EPS of $2.65 to $2.85