Coventry Health Care reports revenues of $3.4 billion for fourth-quarter 2009

Coventry Health Care, Inc. (NYSE:CVH) today reported consolidated operating results for the quarter ended December 31, 2009. Operating revenues totaled $3.4 billion for the quarter with net earnings of $109.1 million, or $0.74 earnings per diluted share (EPS). For the year ended December 31, 2009, total revenues from continuing operations were $13.9 billion with net earnings from continuing operations of $315.3 million, or $2.14 per diluted share.

“Although we continue to operate in a challenging economic environment, as we enter 2010 we remain confident that our focus on Coventry’s seven core businesses will best position us for the future.”

“I am pleased with the progress that the Company has made during 2009 including a strong finish to the year in the fourth quarter,” said Allen F. Wise, chairman and chief executive officer of Coventry. “Although we continue to operate in a challenging economic environment, as we enter 2010 we remain confident that our focus on Coventry’s seven core businesses will best position us for the future.”

Fourth Quarter 2009 Consolidated Highlights

• Revenues from continuing operations increased 15.2% from the prior year quarter
• Medicare Coordinated Care Product (CCP) membership growth of 36% from the prior year quarter
• Medicare Part D membership growth of 47,000 from the prior quarter
• Health plan commercial group risk medical loss ratio of 82.9%
• Excellent liquidity position
  
  
  • Approximately $510 million of deployable free cash at the parent at quarter-end
  • Debt repayment of $110 million during the quarter
• Investment portfolio continues to be in a net unrealized gain position at quarter-end
• Announced agreement to acquire Preferred Health Systems, Inc., a commercial health plan based in Wichita, Kansas, which closed on February 1, 2010

Full Year 2009 Consolidated Highlights

• Revenues from continuing operations increased 18.5% from the prior year
• Fourth consecutive year of strong performance from Medicare Part D including growth of 752,000 members from the prior year, an increase of 81%
• Health plan commercial group risk medical loss ratio of 81.9%
• Individual commercial risk membership growth of 23,000 from the prior year
• Cash flows from operations were $881.8 million
• Debt reduction of $303.5 million from the prior year resulting in a 30.1% debt to capital ratio at year-end
• Completed the divestiture of a non-core business, First Health Services Corporation (FHSC), during the third quarter of 2009

Selected Fourth Quarter and Full Year 2009 Highlights

• Health Plan Commercial Group Premium Yield & Medical Loss Ratio (MLR). Reported commercial group risk premium yields rose to $306.75 PMPM (per member per month) in the quarter, an increase of 5.9% from the prior year quarter. Reported commercial group risk premium yields rose to $301.63 PMPM for the year, an increase of 5.4% from the prior year. The health plan commercial group risk MLR was 82.9% in the quarter, a decrease of 30 basis points from the prior year quarter.
• Medicare Advantage Membership & MLR. As of December 31, 2009, Medicare Advantage membership was 515,000, an increase of 135,000 members from the prior year. Medicare Advantage CCP membership was 186,000, an increase of 49,000 members from the prior year. The Medicare Advantage MLR was 89.4% in the quarter, a decrease of 150 basis points from the prior year quarter. The Medicare Advantage PFFS product line contributed $0.06 per diluted share in the fourth quarter. When combined with the contribution of $0.07 per diluted share previously reported for third quarter year-to-date, the total contribution from the Medicare Advantage PFFS product line was $0.13 per diluted share for full year 2009. As previously announced, the Company has exited this product line effective January 1, 2010.
• Medicare Part D Membership & MLR. As of December 31, 2009, Medicare Part D membership was 1,683,000, an increase of 47,000 members from the prior quarter and 752,000 members from the prior year. The Medicare Part D MLR was 64.4% in the quarter and 85.7% for the full year.
• Medicaid Membership. As of December 31, 2009, Medicaid membership was 402,000, an increase of 11,000 members from the prior quarter. The Medicaid MLR was 85.8% in the quarter, a decrease of 10 basis points from the prior year quarter.
• First Health Services Corporation Divestiture. As previously disclosed, the FHSC divestiture closed on July 31, 2009. In accordance with GAAP, the historical FHSC results of operations are classified as discontinued operations and are excluded from consolidated continuing operations for each period presented. In addition to the results of FHSC operations, the discontinued operations for the full year period of 2009 includes charges to reflect the impact of the FHSC divestiture. As previously disclosed, during 2009 the Company recorded a primarily non-cash charge of $0.56 per diluted share to complete the divestiture. When combined with the $0.06 of EPS generated from FHSC operating results during Coventry’s ownership period ending July 31, 2009, the total EPS from discontinued operations was a loss of $0.50 for the year ended December 31, 2009.

2010 Full Year Guidance

• Risk revenue of $9.74 billion to $10.20 billion
• Management services revenue of $1.12 billion to $1.17 billion
• Consolidated revenue of $10.86 billion to $11.37 billion
• Consolidated MLR of 82.7% to 83.5%
• Cost of sales expense of $235.0 million to $245.0 million
• Selling, general, and administrative expense (SG&A) of $1.92 billion to $1.96 billion
• Depreciation and amortization expense of $137.0 million to $145.0 million
• Other income of $78.0 million to $84.0 million
• Interest expense of $80.0 million to $86.0 million
• Tax rate of 37.0% to 38.0%
• Diluted share count of 144.0 million to 147.5 million
• EPS on a diluted basis of $2.10 to $2.25