EXHIBIT 99.1
FINAL
For Immediate Release | 5995 Plaza Drive | |
Cypress, California 90630 | ||
Tel. (800) 631-0969 |
News Release
CONTACT: | Tyler Mason | Dan Yarbrough | ||
Media Relations | Investor Relations | |||
(714) 226-3530 | (714) 226-3540 | |||
tyler.mason@phs.com | dan.yarbrough@phs.com |
PacifiCare Health Systems Announces
2nd Quarter 2005 Results
• Q2 EPS was $0.96 per diluted share, up 20% from prior year
• Net income totaled $92.6 million, up 22% from Q2 2004
• Commercial MLR improved by 310 basis points year-over-year
• Total senior membership up 6% from prior year |
CYPRESS, Calif., July 28, 2005 —PacifiCare Health Systems, Inc. (NYSE: PHS), today announced that reported net income for the second quarter ended June 30, 2005 was $92.6 million, or $0.96 per diluted share. This compares with reported net income of $76 million, or $0.80 per diluted share, for the second quarter of 2004.
“We are very pleased with the year-over-year increase in our earnings, which were ahead of consensus expectations even after including approximately $7.6 million, or 5 cents per share, in costs related to our Medicare Part D readiness and $4 million, or 3 cents per share, in out-of-pocket costs related to our previously announced agreement to merge with UnitedHealth Group,” said Chairman and Chief Executive Officer Howard Phanstiel. “This earnings improvement was driven by higher senior membership, higher commercial membership and a 310 basis point decrease in the commercial medical loss ratio.”
1
Revenue and Membership
Second quarter 2005 total operating revenue of $3.6 billion was 18% higher than the same quarter a year ago. Total commercial revenue rose 19%, driven by a 6% rise in premiums per member per month (PMPM) and 15% growth in fully insured and ASO membership, including the acquisitions of American Medical Security Group (AMS) and the group health business of Pacific Life Insurance Company. Senior revenue grew 14% over the second quarter of last year, primarily as the result of a premium increase of 7% PMPM and a 6% rise in membership.
Specialty and Other revenue grew 35% over the second quarter last year, primarily as the result of a 24% rise in retail service contract and mail order fulfillment revenues at PacifiCare’s pharmacy benefit management company and membership growth at both the behavioral health and dental and vision subsidiaries.
Health Care Costs
The private sector commercial medical loss ratio (MLR) in the second quarter improved 310 basis points from the prior year, to 81.2%. This improvement was driven primarily by business mix changes resulting from the AMS and Pacific Life transactions, but also included an 80 basis point reduction in the MLR related to same-store membership.
The government sector senior MLR was up 110 basis points year-over-year, to 87.5%, primarily as the result of benefit increases intended to grow Medicare Advantage membership. However, the second quarter MLR was at the low end of the company’s previously issued 2005 full-year guidance of 87.5% to 88.5%.
The consolidated MLR of 84.1% was 100 basis points lower than the second quarter of the prior year.
Selling, General & Administrative Expenses
The SG&A expense ratio of 13.4% in the second quarter of 2005 was 110 basis points higher than the second quarter of 2004 and 20 basis points higher sequentially. The year-over-year
2
increase was primarily a result of changes in business mix related to the acquired AMS and Pacific Life business, as well as $4 million in costs incurred in connection with the pending merger with UnitedHealth Group and the company’s preparations to administer the new Medicare Part D benefit. The sequential increase is primarily attributable to the costs related to the pending merger with UnitedHealth Group, increased Medicare Part D readiness costs and the impact of a higher SG&A ratio associated with the acquired Pacific Life membership.
Other Financial Data
Medical claims and benefits payable (MCBP) totaled approximately $1.25 billion at June 30, 2005, which was an increase of approximately $48 million from the prior quarter. The IBNR component of MCBP increased by approximately $29 million sequentially.
Days claims payable for the second quarter compared to the prior quarter increased slightly to 38.8 days from 38.2 days. However, after excluding the non-risk, capitated portion of the company’s business, as well as other non-claim related liabilities, days claims payable decreased from 68.3 to 66.7 days.
Cash flow from operations in the second quarter of 2005 was $14 million. This includes the effect of certain large items in the quarter, including tax payments totaling more than $115 million. Additionally, accounts receivable increased due to the timing of premiums received in connection with the coinsurance arrangement related to the Pacific Life acquisition, and an increasing receivable balance from the Centers for Medicare and Medicaid Services for accrued revenue that is expected to be received in September.
Conference Call, Webcast and Website Information
PacifiCare will host a conference call and webcast on Thursday, July 28, 2005 at 8:00 AM Pacific time, 11:00 AM Eastern, to discuss this release in further detail. Interested parties can access the live conference by dialing (877) 601-3546, password “PacifiCare”. A replay of the call will be available through August 19, 2005 at (866) 403-8762. Additionally, a live webcast of the call will be available at www.pacificare.com. Click on Investor Relations, and then Conference Calls to access the link. In accordance with Regulation G, a reconciliation of GAAP
3
results to any non-GAAP measurements referred to in this release and during the conference call will be posted with the earnings press release on our website.
Risk Factors Regarding Forward-Looking Statements
The statements in this news release that are not historical facts are forward-looking statements within the meaning of the Federal securities laws, and may involve a number of risks and uncertainties. Such forward-looking statements include, but are not limited, to the company’s expectations regarding financial results, including earnings, for the full-year 2005. Important factors that could cause results to differ materially from those expected by management include, but are not limited to, failure to implement programs to achieve expected membership, revenue or earnings targets as a result of premium or benefit adjustments; the inability to execute cost control strategies, including medical management programs; actual medical claims differing from current estimates; inability to maintain required capital levels at the company’s regulated subsidiaries; inability to maintain profitability and growth at the company’s specialty businesses; provider contractual or financial problems or bankruptcy; unexpected increases in competition; new regulations or laws relating to capitation; Medicare reimbursements, benefit mandates, service, utilization management, provider contracts and similar matters; and the inability to comply with existing bank covenants. Additional information on factors, risks, and uncertainties that could potentially affect our financial results may be found in documents filed with the Securities and Exchange Commission.
PacifiCare Health Systems is one of the nation’s largest consumer health organizations with approximately 3.3 million health plan members and approximately 11.3 million specialty plan members nationwide. PacifiCare offers individuals, employers and Medicare beneficiaries a variety of consumer-driven health care and life insurance products. Specialty plan operations include behavioral health, dental and vision, and complete pharmacy benefit management through its wholly owned subsidiary, Prescription Solutions. More information on PacifiCare Health Systems is available at www.pacificare.com.
4
PACIFICARE HEALTH SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands, except per-share amounts) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Revenue: | ||||||||||||||||
Commercial | $ | 1,678,717 | $ | 1,413,587 | $ | 3,245,049 | $ | 2,799,905 | ||||||||
Senior | 1,637,775 | 1,441,187 | 3,257,480 | 2,851,300 | ||||||||||||
Specialty and other | 230,454 | 170,845 | 452,148 | 320,692 | ||||||||||||
Net investment income | 34,510 | 21,829 | 62,402 | 39,674 | ||||||||||||
Total operating revenue | 3,581,456 | 3,047,448 | 7,017,079 | 6,011,571 | ||||||||||||
Expenses: | ||||||||||||||||
Health care services and other: | ||||||||||||||||
Commercial | 1,367,917 | 1,198,216 | 2,656,317 | 2,366,779 | ||||||||||||
Senior | 1,431,195 | 1,248,111 | 2,840,136 | 2,473,072 | ||||||||||||
Specialty and other | 137,421 | 93,420 | 269,753 | 174,492 | ||||||||||||
Total health care services and other | 2,936,533 | 2,539,747 | 5,766,206 | 5,014,343 | ||||||||||||
Selling, general and administrative expenses | 475,729 | 372,423 | 924,860 | 741,475 | ||||||||||||
Operating income | 169,194 | 135,278 | 326,013 | 255,753 | ||||||||||||
Interest expense, net | (18,729 | ) | (10,853 | ) | (35,506 | ) | (21,670 | ) | ||||||||
Income before income taxes | 150,465 | 124,425 | 290,507 | 234,083 | ||||||||||||
Provision for income taxes | 57,888 | 48,401 | 112,224 | 91,058 | ||||||||||||
Net income | $ | 92,577 | $ | 76,024 | $ | 178,283 | $ | 143,025 | ||||||||
Weighted average common shares outstanding used to calculate basic earnings per share | 86,413 | 84,933 | 86,152 | 84,602 | ||||||||||||
Basic earnings per share | $ | 1.07 | $ | 0.90 | $ | 2.07 | $ | 1.69 | ||||||||
Weighted average common shares and equivalents outstanding used to calculate diluted earnings per share | 97,253 | 96,132 | 97,130 | 95,849 | ||||||||||||
Diluted earnings per share | $ | 0.96 | $ | 0.80 | $ | 1.85 | $ | 1.51 | ||||||||
OPERATING STATISTICS | ||||||||||||||||
Medical loss ratio: | ||||||||||||||||
Consolidated | 84.1 | % | 85.1 | % | 84.2 | % | 85.1 | % | ||||||||
Private - Commercial | 81.2 | % | 84.3 | % | 81.5 | % | 83.9 | % | ||||||||
Private - Senior | 69.5 | % | 64.9 | % | 76.1 | % | 73.8 | % | ||||||||
Private - Consolidated | 81.0 | % | 83.9 | % | 81.4 | % | 83.8 | % | ||||||||
Government - Senior | 87.5 | % | 86.4 | % | 87.2 | % | 86.5 | % | ||||||||
Government - Consolidated | 87.5 | % | 86.4 | % | 87.2 | % | 86.5 | % | ||||||||
Selling, general and administrative expenses as a percentage of operating revenue (excluding net investment income) | 13.4 | % | 12.3 | % | 13.3 | % | 12.4 | % | ||||||||
Operating income as a percentage of operating revenue | 4.7 | % | 4.4 | % | 4.6 | % | 4.3 | % | ||||||||
Effective tax rate | 38.5 | % | 38.9 | % | 38.6 | % | 38.9 | % |
PACIFICARE HEALTH SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Operating activities: | ||||||||||||||||
Net income | $ | 92,577 | $ | 76,024 | $ | 178,283 | $ | 143,025 | ||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||||
Depreciation and amortization | 15,473 | 12,705 | 30,606 | 24,721 | ||||||||||||
Deferred income taxes | (36,838 | ) | 31,806 | (25,772 | ) | 34,021 | ||||||||||
Tax benefit realized for stock option exercises | 9,218 | 3,553 | 21,491 | 13,364 | ||||||||||||
Stock-based compensation expense | 8,915 | 10,925 | 15,979 | 20,377 | ||||||||||||
Amortization of intangible assets | 5,276 | 4,947 | 10,857 | 9,893 | ||||||||||||
Amortization of notes receivable from sale of fixed assets | (1,330 | ) | (1,391 | ) | (2,626 | ) | (2,751 | ) | ||||||||
Amortization of capitalized loan fees | 1,042 | 1,078 | 2,076 | 2,155 | ||||||||||||
Provision for (recovery on) doubtful accounts | 229 | 44 | (1,064 | ) | (1,176 | ) | ||||||||||
Amortization of discount on 10 3/4% senior notes | 377 | 71 | 448 | 142 | ||||||||||||
Loss (gain) on disposal of property, plant and equipment and other | (210 | ) | 219 | 99 | 424 | |||||||||||
Changes in assets and liabilities, net of effects of acquisitions: | ||||||||||||||||
Receivables, net | (70,370 | ) | (3,827 | ) | (84,342 | ) | (51,200 | ) | ||||||||
Prepaid expenses and other assets | 11,249 | 1,772 | 7,033 | (10,843 | ) | |||||||||||
Medical claims and benefits payable | 33,202 | (23,800 | ) | 43,102 | 53,200 | |||||||||||
Accounts payable and accrued liabilities: | ||||||||||||||||
Accrued taxes | (35,913 | ) | (40,286 | ) | (18,075 | ) | (8,046 | ) | ||||||||
Other changes in accounts payable and accrued liabilities | (15,597 | ) | (32,053 | ) | (38,183 | ) | (21,768 | ) | ||||||||
Unearned premium revenue | (3,179 | ) | (16,525 | ) | 2,393 | (398,307 | ) | |||||||||
Net cash flows provided by (used in) operating activities | 14,121 | 25,262 | 142,305 | (192,769 | ) | |||||||||||
Investing activities: | ||||||||||||||||
Purchase of marketable securities, net | (48,139 | ) | (52,296 | ) | (147,822 | ) | (110,985 | ) | ||||||||
Acquisitions, net of cash acquired | (47,389 | ) | — | (54,746 | ) | — | ||||||||||
Sale (purchase) of marketable securities - restricted | (41,373 | ) | (2,327 | ) | (41,905 | ) | 26,863 | |||||||||
Purchase of property, plant and equipment | (16,968 | ) | (13,031 | ) | (31,971 | ) | (27,272 | ) | ||||||||
Proceeds from the sale of property, plant and equipment | 2,452 | — | 2,452 | — | ||||||||||||
Net cash flows used in investing activities | (151,417 | ) | (67,654 | ) | (273,992 | ) | (111,394 | ) | ||||||||
Financing activities: | ||||||||||||||||
Proceeds from issuance of common stock | 8,685 | 9,830 | 19,377 | 31,076 | ||||||||||||
Principal payments on long-term debt | (8,726 | ) | (457 | ) | (17,439 | ) | (948 | ) | ||||||||
Purchase and retirement of common stock | (1,174 | ) | (38,030 | ) | (13,845 | ) | (40,542 | ) | ||||||||
Adjustment to fair value of 10 3/4% senior notes | (7,487 | ) | — | (7,487 | ) | — | ||||||||||
Payments on software financing agreements | (1,372 | ) | (1,448 | ) | (2,728 | ) | (4,053 | ) | ||||||||
Net cash flows used in financing activities | (10,074 | ) | (30,105 | ) | (22,122 | ) | (14,467 | ) | ||||||||
Net decrease in cash and equivalents | (147,370 | ) | (72,497 | ) | (153,809 | ) | (318,630 | ) | ||||||||
Beginning cash and equivalents | 817,665 | 952,289 | 824,104 | 1,198,422 | ||||||||||||
Ending cash and equivalents | $ | 670,295 | $ | 879,792 | $ | 670,295 | $ | 879,792 | ||||||||
PACIFICARE HEALTH SYSTEMS, INC.
BALANCE SHEET DATA
(Unaudited)
(in thousands) | June 30, 2005 | December 31, 2004 | June 30, 2004 | ||||||
Assets: | |||||||||
Cash, equivalents and marketable securities | $ | 2,744,372 | $ | 2,760,869 | $ | 2,316,405 | |||
Receivables, net | 405,394 | 317,362 | 313,770 | ||||||
Property, plant and equipment, net | 230,198 | 226,594 | 151,534 | ||||||
Goodwill and intangible assets, net | 1,565,299 | 1,505,799 | 1,194,319 | ||||||
Other assets | 482,731 | 416,293 | 395,003 | ||||||
Total assets | $ | 5,427,994 | $ | 5,226,917 | $ | 4,371,031 | |||
Liabilities and stockholders’ equity: | |||||||||
Total medical claims and benefits payable | $ | 1,250,700 | $ | 1,192,400 | $ | 1,080,700 | |||
Current portion of long-term debt | 35,146 | 37,534 | 6,142 | ||||||
Long-term debt | 1,026,702 | 1,051,520 | 609,195 | ||||||
Other liabilities | 709,544 | 757,025 | 673,823 | ||||||
Total stockholders’ equity | 2,405,902 | 2,188,438 | 2,001,171 | ||||||
Total liabilities and stockholders’ equity | $ | 5,427,994 | $ | 5,226,917 | $ | 4,371,031 | |||
MEMBERSHIP DATA
| |||||||||
June 30, 2005 | December 31, 2004 | June 30, 2004 | |||||||
Total Membership: | |||||||||
Commercial: | |||||||||
HMO | 1,758,200 | 1,927,900 | 1,963,000 | ||||||
PPO and indemnity | 746,200 | 582,500 | 279,500 | ||||||
Employer self-funded | 106,300 | 82,600 | 27,500 | ||||||
2,610,700 | 2,593,000 | 2,270,000 | |||||||
Senior: | |||||||||
Medicare Advantage | 721,700 | 704,700 | 689,600 | ||||||
Medicare Supplement | 40,000 | 36,200 | 32,800 | ||||||
CMS Disease Management | 4,200 | 2,500 | — | ||||||
765,900 | 743,400 | 722,400 | |||||||
Total membership | 3,376,600 | 3,336,400 | 2,992,400 | ||||||
Specialty Membership: | |||||||||
Pharmacy benefit management(A) | 5,502,900 | 5,588,700 | 5,545,100 | ||||||
Behavioral health(B) | 4,626,200 | 3,813,600 | 3,752,600 | ||||||
Dental and vision (B) | 1,183,300 | 1,040,500 | 809,000 |
(A) | Pharmacy benefit management membership includes PacifiCare members that are in our Commercial, Medicare Advantage, Medicare Supplement or CMS Disease Management plans, excluding members covered under other PBM contracts. All of these members either have a prescription drug benefit or are able to purchase their prescriptions utilizing our retail network contracts or our mail service. |
(B) | Behavioral health, dental and vision membership includes PacifiCare members in our Commercial, Medicare Advantage or Medicare Supplement plans that are also enrolled in our behavioral health, dental and/or vision plans. |
PacifiCare Health Systems, Inc.
Membership Information
(Unaudited)
(In thousands) | June 30, 2005 | March 31, 2005 | June 30, 2004 | |||||||||||||||
Commercial | Medicare Advantage | TOTAL | Commercial | Medicare Advantage | TOTAL | Commercial | Medicare Advantage | TOTAL | ||||||||||
Managed Care Membership (1) | ||||||||||||||||||
Arizona | 174.9 | 109.4 | 284.3 | 174.0 | 107.8 | 281.8 | 167.2 | 93.6 | 260.8 | |||||||||
California | 1,481.0 | 359.0 | 1,840.0 | 1,475.9 | 360.7 | 1,836.6 | 1,493.1 | 357.1 | 1,850.2 | |||||||||
Colorado | 224.2 | 53.1 | 277.3 | 222.2 | 52.3 | 274.5 | 247.9 | 52.1 | 300.0 | |||||||||
Florida | 37.0 | — | 37.0 | 29.5 | — | 29.5 | — | — | — | |||||||||
Guam | 26.5 | — | 26.5 | 26.5 | — | 26.5 | 27.5 | — | 27.5 | |||||||||
Illinois | 44.0 | — | 44.0 | 36.0 | — | 36.0 | — | — | — | |||||||||
Michigan | 53.5 | — | 53.5 | 44.1 | — | 44.1 | — | — | — | |||||||||
Nevada | 48.6 | 26.3 | 74.9 | 44.8 | 25.9 | 70.7 | 36.0 | 25.2 | 61.2 | |||||||||
Oklahoma | 71.1 | 15.9 | 87.0 | 65.8 | 15.1 | 80.9 | 83.9 | 15.3 | 99.2 | |||||||||
Oregon | 55.4 | 23.1 | 78.5 | 55.3 | 22.9 | 78.2 | 58.3 | 23.2 | 81.5 | |||||||||
Texas | 158.7 | 93.6 | 252.3 | 108.5 | 89.0 | 197.5 | 89.8 | 76.8 | 166.6 | |||||||||
Washington | 63.8 | 41.3 | 105.1 | 62.1 | 42.4 | 104.5 | 66.3 | 46.3 | 112.6 | |||||||||
Other states | 172.0 | — | 172.0 | 137.1 | — | 137.1 | — | — | — | |||||||||
Total Managed Care Membership | 2,610.7 | 721.7 | 3,332.4 | 2,481.8 | 716.1 | 3,197.9 | 2,270.0 | 689.6 | 2,959.6 | |||||||||
Total Membership | ||||||||||||||||||
Commercial | ||||||||||||||||||
HMO | 1,758.2 | 1,780.6 | 1,963.0 | |||||||||||||||
PPO | 746.2 | 595.5 | 279.5 | |||||||||||||||
Employer self-funded | 106.3 | 105.7 | 27.5 | |||||||||||||||
Total Commercial | 2,610.7 | 2,481.8 | 2,270.0 | |||||||||||||||
Senior | ||||||||||||||||||
Medicare Advantage | 721.7 | 716.1 | 689.6 | |||||||||||||||
Medicare Supplement | 40.0 | 38.1 | 32.8 | |||||||||||||||
CMS Disease Management | 4.2 | 3.7 | — | |||||||||||||||
Total Senior | 765.9 | 757.9 | 722.4 | |||||||||||||||
Total Membership | 3,376.6 | 3,239.7 | 2,992.4 | |||||||||||||||
June 30, 2005 | March 31, 2005 | June 30, 2004 | ||||||||||||||||
PacifiCare | Unaffiliated | TOTAL | PacifiCare | Unaffiliated | TOTAL | PacifiCare | Unaffiliated | TOTAL | ||||||||||
Specialty Membership | ||||||||||||||||||
Pharmacy benefit management (2) | 2,942.6 | 2,560.3 | 5,502.9 | 2,932.0 | 2,554.0 | 5,486.0 | 2,992.4 | 2,552.7 | 5,545.1 | |||||||||
Behavioral health (3) | 1,984.6 | 2,641.6 | 4,626.2 | 1,970.3 | 2,632.5 | 4,602.8 | 1,995.6 | 1,757.0 | 3,752.6 | |||||||||
Dental and vision (3) | 939.2 | 244.1 | 1,183.3 | 921.3 | 244.2 | 1,165.5 | 689.4 | 119.6 | 809.0 |
(1) | Managed care membership includes HMO and PPO membership whether risk or self-funded. |
(2) | Pharmacy benefit management PacifiCare membership represents members that are in our Commercial, Medicare Advantage, Medicare Supplement or CMS Disease Management plans, excluding members covered under other PBM contracts. All of these members either have a prescription drug benefit or are able to purchase their prescriptions utilizing our retail network contracts or our mail service. |
(3) | Behavioral health, dental and vision PacifiCare membership represents members in our Commercial, Medicare Advantage or Medicare Supplement plans that are also enrolled in our behavioral health, dental and/or vision plans. |
PacifiCare Health Systems, Inc.
Percent of Health Care Services and Other Expenses
Capitated vs. Other Expenses
(Unaudited)
Three Months Ended June 30, | ||||||||||||||||||||||||
(In millions) | 2005 | 2004 | ||||||||||||||||||||||
Commercial | Senior | Commercial | Senior | |||||||||||||||||||||
(amounts in millions) | ||||||||||||||||||||||||
Capitation expense | $ | 377 | 28 | % | $ | 779 | 54 | % | $ | 403 | 34 | % | $ | 711 | 57 | % | ||||||||
All other health care services and other expenses | 991 | 72 | % | 652 | 46 | % | 795 | 66 | % | 537 | 43 | % | ||||||||||||
Total health care services and other expenses | $ | 1,368 | 100 | % | $ | 1,431 | 100 | % | $ | 1,198 | 100 | % | $ | 1,248 | 100 | % | ||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
(In millions) | 2005 | 2004 | ||||||||||||||||||||||
Commercial | Senior | Commercial | Senior | |||||||||||||||||||||
(amounts in millions) | ||||||||||||||||||||||||
Capitation expense | $ | 761 | 29 | % | $ | 1,548 | 55 | % | $ | 802 | 34 | % | $ | 1,413 | 57 | % | ||||||||
All other health care services and other expenses | 1,895 | 71 | % | 1,292 | 45 | % | 1,565 | 66 | % | 1,060 | 43 | % | ||||||||||||
Total health care services and other expenses | $ | 2,656 | 100 | % | $ | 2,840 | 100 | % | $ | 2,367 | 100 | % | $ | 2,473 | 100 | % | ||||||||
PacifiCare Health Systems, Inc.
Changes in Medical Claims and Benefits Payable
(Unaudited)
(In thousands)
Balance March 31, 2005 | $ | 1,202,300 | |||
IBNR health care increases | 29,400 | Increase is primarily due to the acquisition of Pacific Life, offset by an increase in the speed of cash payments on claims | |||
Provider capitation | 15,500 | Increase is primarily due to accruals for capitation amounts due to providers on receivables from CMS | |||
All other changes | 3,500 | ||||
Balance June 30, 2005 | $ | 1,250,700 | |||
PacifiCare Health Systems, Inc.
Medical Claims and Benefits Payable (MCBP) Information
(unaudited)
Three Months Ended | |||||||||||||||||
6/30/2004 | 9/30/2004 | 12/31/2004(4) | 3/31/2005 | 6/30/2005 | |||||||||||||
Commercial | Days in the period | 91 | 92 | 92 | 90 | 91 | |||||||||||
A | MCBP ($000s) at end of period | $ | 691,109 | $ | 680,842 | $ | 679,615 | $ | 782,200 | $ | 828,100 | ||||||
B | Total HMO and PPO commercial members (000s) at end of period | 2,242 | 2,228 | 2,239 | 2,376 | 2,504 | |||||||||||
C=A/B | MCBP per member at end of period | $ | 308.26 | $ | 305.58 | $ | 303.54 | $ | 329.21 | $ | 330.71 | ||||||
D=A/(Health care costs/Days in quarter) | Days claims payable | 48.7 | 48.4 | 47.8 | 49.6 | 50.1 | |||||||||||
E | IBNR ($000s)(3) | $ | 548,959 | $ | 553,904 | $ | 562,669 | $ | 634,148 | $ | 680,960 | ||||||
F | Claims expense per day ($000s)(3) | $ | 7,327 | $ | 7,352 | $ | 7,533 | $ | 8,509 | $ | 9,498 | ||||||
G=E/B | IBNR per member at end of period | $ | 244.85 | $ | 248.61 | $ | 251.30 | $ | 266.90 | $ | 271.95 | ||||||
H=E/F | IBNR days claims payable | 74.9 | 75.3 | 74.7 | 74.5 | 71.7 | |||||||||||
I | Days to turn claims(1), (2) | 63.5 | 61.5 | 62.4 | 59.5 | 59.5 | |||||||||||
J = H/I | IBNR days claims payable/days to turn claims ratio | 1.18 | 1.23 | 1.20 | 1.25 | 1.20 | |||||||||||
Senior | |||||||||||||||||
A | MCBP ($000s) at end of period | $ | 389,591 | $ | 385,758 | $ | 394,831 | $ | 420,100 | $ | 422,600 | ||||||
B | Total Medicare Advantage and Medicare Supplement members (000s) at end of period | 722 | 729 | 743 | 758 | 766 | |||||||||||
C=A/B | MCBP per member at end of period | $ | 539.60 | $ | 529.16 | $ | 531.40 | $ | 554.22 | $ | 551.70 | ||||||
D=A/(Health care costs/Days in quarter) | Days claims payable | 28.4 | 28.2 | 28.4 | 26.8 | 26.9 | |||||||||||
E | IBNR ($000s)(3) | $ | 303,222 | $ | 291,238 | $ | 310,250 | $ | 333,204 | $ | 319,132 | ||||||
F | Claims expense per day ($000s)(3) | $ | 4,847 | $ | 4,660 | $ | 4,994 | $ | 5,655 | $ | 5,486 | ||||||
G=E/B | IBNR per member at end of period | $ | 419.98 | $ | 399.50 | $ | 417.56 | $ | 439.58 | $ | 416.62 | ||||||
H=E/F | IBNR days claims payable | 62.6 | 62.5 | 62.1 | 58.9 | 58.2 | |||||||||||
I | Days to turn claims(1), (2) | 47.1 | 44.9 | 47.4 | 49.7 | 49.7 | |||||||||||
J = H/I | IBNR days claims payable/days to turn claims ratio | 1.33 | 1.39 | 1.31 | 1.19 | 1.17 | |||||||||||
Consolidated | |||||||||||||||||
A | MCBP ($000s) at end of period | $ | 1,080,700 | $ | 1,066,600 | $ | 1,074,446 | $ | 1,202,300 | $ | 1,250,700 | ||||||
B | Total members (000s) at end of period | 2,964 | 2,957 | 2,982 | 3,134 | 3,270 | |||||||||||
C=A/B | MCBP per member at end of period | $ | 364.61 | $ | 360.70 | $ | 360.31 | $ | 383.63 | $ | 382.48 | ||||||
D=A/(Health care costs/Days in quarter) | Days claims payable | 38.7 | 38.5 | 38.3 | 38.2 | 38.8 | |||||||||||
E | IBNR ($000s)(3) | $ | 852,181 | $ | 845,142 | $ | 872,919 | $ | 967,352 | $ | 1,000,092 | ||||||
F | Claims expense per day ($000s)(3) | $ | 12,174 | $ | 12,012 | $ | 12,527 | $ | 14,164 | $ | 14,984 | ||||||
G=E/B | IBNR per member at end of period | $ | 287.51 | $ | 285.81 | $ | 292.73 | $ | 308.66 | $ | 305.84 | ||||||
H=E/F | IBNR days claims payable | 70.0 | 70.4 | 69.7 | 68.3 | 66.7 | |||||||||||
I | Days to turn claims(1), (2) | 56.6 | 54.7 | 56.7 | 55.5 | 55.5 | |||||||||||
J = H/I | IBNR days claims payable/days to turn claims ratio | 1.24 | 1.29 | 1.23 | 1.23 | 1.20 | |||||||||||
K | Days receipts on hand(3) | 6.0 | 5.3 | 5.8 | 6.2 | 6.3 |
Note 1 - Excludes pharmacy, third party administered claims and Pacific Life claims.
Note 2 - June 30, 2005 days to turn claims assumes no further improvement in speed.
Note 3 - Excludes pharmacy claims.
Note 4 - Excludes the impact of 19 days of AMS operations.
PacifiCare Health Systems, Inc.
Medical Claims and Benefits Payable (MCBP) Information
(unaudited)
Q2 2005 compared to Q2 2004 | ||||||||||||
Analysis | Commercial | Senior | Consolidated | |||||||||
Days to turn claims - June 30, 2005 | 59.5 | 49.7 | 55.5 | |||||||||
Days to turn claims - June 30, 2004 | 63.5 | 47.1 | 56.6 | |||||||||
Increase (decrease) in days to turn claims from June 30, 2004 to June 30, 2005 | (4.0 | ) | 2.6 | (1.1 | ) | |||||||
Q2 2004 claims expense per day ($000s) | $ | 7,327 | $ | 4,847 | $ | 12,174 | ||||||
Expected IBNR increase (decrease) from improved speed of claims payments ($000s) | $ | (29,308 | ) | $ | 12,602 | $ | (13,391 | ) | ||||
Total members at June 30, 2004 (000s) | 2,242 | 722 | 2,964 | |||||||||
IBNR increase (decrease) per member from improved speed of claims payments | $ | (13.07 | ) | $ | 17.45 | $ | (4.52 | ) | ||||
MCBP per member at June 30, 2004 | 308.26 | 539.60 | 364.61 | |||||||||
Expected MCBP per member Q2 2004 assuming improved speed of claims payments | $ | 295.19 | $ | 557.05 | $ | 360.09 | ||||||
MCBP per member at June 30, 2005 | $ | 330.71 | $ | 551.70 | $ | 382.48 | ||||||
MCBP per member increase (decrease) over second quarter of prior year | 12.0 | % | -1.0 | % | 6.2 | % | ||||||
Compares To: | ||||||||||||
Health care cost per member - Three months ended June 30, 2004(1), (2) | $ | 161.79 | $ | 543.29 | $ | 254.99 | ||||||
Health care cost per member - Three months ended June 30, 2005(1), (2) | $ | 171.06 | $ | 572.33 | $ | 266.09 | ||||||
Health care cost increase per member over second quarter of prior year | 5.7 | % | 5.3 | % | 4.4 | % |
Note 1 - Excludes pharmacy claims.
Note 2 - Excludes CMS Disease Management program.
PacifiCare Health Systems, Inc.
Medical Loss Ratio Information
(Unaudited)
(amounts in millions)
COMMERCIAL | SENIOR | TOTAL | |||||||||||||||||||||||||
Premiums | Health Care Services Expenses | MLR | Premiums | Health Care Services Expenses | MLR | Premiums | Health Care Services Expenses | MLR | |||||||||||||||||||
Year Ended June 30, 2005: | |||||||||||||||||||||||||||
Private Sector | $ | 3,457.4 | $ | 2,818.4 | 81.5 | % | $ | 54.5 | $ | 41.5 | 76.1 | % | $ | 3,511.9 | $ | 2,859.9 | 81.4 | % | |||||||||
Government Sector | — | — | N/A | 3,212.8 | 2,801.5 | 87.2 | % | 3,212.8 | 2,801.5 | 87.2 | % | ||||||||||||||||
Consolidated | $ | 3,457.4 | $ | 2,818.4 | 81.5 | % | $ | 3,267.3 | $ | 2,843.0 | 87.0 | % | $ | 6,724.7 | $ | 5,661.4 | 84.2 | % | |||||||||
Quarter Ended June 30, 2005: | |||||||||||||||||||||||||||
Private Sector | $ | 1,784.7 | $ | 1,449.1 | 81.2 | % | $ | 27.8 | $ | 19.3 | 69.5 | % | $ | 1,812.5 | $ | 1,468.4 | 81.0 | % | |||||||||
Government Sector | — | — | N/A | 1,615.0 | 1,413.3 | 87.5 | % | 1,615.0 | 1,413.3 | 87.5 | % | ||||||||||||||||
Consolidated | $ | 1,784.7 | $ | 1,449.1 | 81.2 | % | $ | 1,642.8 | $ | 1,432.6 | 87.2 | % | $ | 3,427.5 | $ | 2,881.7 | 84.1 | % | |||||||||
Year Ended June 30, 2004: | |||||||||||||||||||||||||||
Private Sector | $ | 2,951.7 | $ | 2,478.0 | 83.9 | % | $ | 48.4 | $ | 35.7 | 73.8 | % | $ | 3,000.1 | $ | 2,513.7 | 83.8 | % | |||||||||
Government Sector | — | — | N/A | 2,812.4 | 2,432.5 | 86.5 | % | 2,812.4 | 2,432.5 | 86.5 | % | ||||||||||||||||
Consolidated | $ | 2,951.7 | $ | 2,478.0 | 83.9 | % | $ | 2,860.8 | $ | 2,468.2 | 86.3 | % | $ | 5,812.5 | $ | 4,946.2 | 85.1 | % | |||||||||
Quarter Ended June 30, 2004: | |||||||||||||||||||||||||||
Private Sector | $ | 1,489.8 | $ | 1,255.2 | 84.3 | % | $ | 24.8 | $ | 16.1 | 64.9 | % | $ | 1,514.6 | $ | 1,271.3 | 83.9 | % | |||||||||
Government Sector | — | — | N/A | 1,422.9 | 1,229.0 | 86.4 | % | 1,422.9 | 1,229.0 | 86.4 | % | ||||||||||||||||
Consolidated | $ | 1,489.8 | $ | 1,255.2 | 84.3 | % | $ | 1,447.7 | $ | 1,245.1 | 86.0 | % | $ | 2,937.5 | $ | 2,500.3 | 85.1 | % | |||||||||
PacifiCare Health Systems, Inc.
Reconciliation of Non-GAAP Measures
(Unaudited)
Non-GAAP Measures
We utilize certain non-GAAP measures to evaluate our performance and consider these measures important indicators of our success. These measures should not be considered an alternative to measurements required by accounting principles generally accepted in the United States. In addition, our non-GAAP measures may not be comparable to similar measures reported by other companies.
Medical Loss Ratio Premiums and Health Care Services Expenses
The following sets forth a reconciliation of premium revenues and health care services expenses used in the calculation of our medical loss ratio to the revenue and health care services and other expenses (which is the closest GAAP financial measure) as shown on the consolidated statements of income:
(In millions) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||
Private - Commercial: | ||||||||||||||
Commercial revenue | $ | 1,678.7 | $ | 1,413.6 | $ | 3,245.0 | $ | 2,799.9 | ||||||
Net effect of specialty premiums, administrative service fee revenue and eliminations | 106.0 | 76.2 | 212.4 | 151.8 | ||||||||||
Consolidated private - commercial premiums | $ | 1,784.7 | $ | 1,489.8 | $ | 3,457.4 | $ | 2,951.7 | ||||||
Commercial health care services and other expenses | $ | 1,367.9 | $ | 1,198.2 | $ | 2,656.3 | $ | 2,366.8 | ||||||
Net effect of specialty health care services and other expenses and eliminations | 81.2 | 57.0 | 162.1 | 111.2 | ||||||||||
Consolidated health care services expenses related to consolidated private - commercial premiums | $ | 1,449.1 | $ | 1,255.2 | $ | 2,818.4 | $ | 2,478.0 | ||||||
Government - Senior: | ||||||||||||||
Senior revenue | $ | 1,637.8 | $ | 1,441.2 | $ | 3,257.5 | $ | 2,851.3 | ||||||
Net effect of specialty premiums, private - senior premiums, administrative service fee revenue and eliminations | 5.0 | 6.5 | 9.8 | 9.5 | ||||||||||
Consolidated government - senior premiums | $ | 1,642.8 | $ | 1,447.7 | $ | 3,267.3 | $ | 2,860.8 | ||||||
Senior health care services and other expenses | $ | 1,431.2 | $ | 1,248.1 | $ | 2,840.1 | $ | 2,473.1 | ||||||
Net effect of specialty health care services and other expenses, private - senior health care services and other expenses and eliminations | 1.4 | (3.0 | ) | 2.9 | (4.9 | ) | ||||||||
Consolidated health care services expenses related to consolidated government - senior premiums | $ | 1,432.6 | $ | 1,245.1 | $ | 2,843.0 | $ | 2,468.2 | ||||||
PacifiCare Health Systems, Inc.
Guidance Metrics
(Unaudited)
Commercial Membership Growth* | 1.5%-2.5% | |
Medicare Advantage Ending Members* | 745,000 | |
Revenue Increase | 17.5%-18.5% | |
MLRs | ||
Consolidated | 84%-85% | |
Private - Commercial | 81%-82% | |
Private - Senior | 73%-74% | |
Government - Senior | 87.5%-88.5% | |
Gross Margins | ||
Commercial | 18%-19% | |
Senior | 11.5%-12.5% | |
Specialty and Other* | 39%-40% | |
EBITDA | $750 - $775 million | |
Cash Flow from Operations (CFFO) | $500 - $525 million | |
Free Cash Flow | $320 - $335 million | |
SG&A Ratio* | 13%-13.5% | |
Depreciation/Amortization | $89 million | |
Capital Expenditures | $130 - $135 million | |
Net Income | $365 - $380 million | |
Average Outstanding Shares | 98.8 million | |
EPS, Full Year | $3.70 - $3.85 | |
EPS, 3rd Quarter*, ** | $1.01 - $1.06 | |
Tax Rate | 38.8% |
* | Indicates change or addition since last issuance on April 28, 2005. |
** | Excludes anticipated Part D stand-alone administrative expenses. |